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tSW  BOOKS, 
:hiC4.GO.  ILI. 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


M^7m^^^- 


^"Y^JL^ 


CASES  ON 

CONTRACTS 

AND 

COMBINATIONS 
IN  RESTRAINT  OF  TRADE 


SELECTED  FROM  THE  DECISIONS  OF 
ENGLISH   AND   AMERICAN    COURTS 


By  ALBERT  M.  KALES 

Professor  of  Law  in  Harvard  University 


IN  TWO  VOLUMES 

VOLUME  I 


CHICAGO 
CALLAGHAN  AND  COMPANY 

1916 


T 
W  )  "SI.  H  (r  coTi 

1^  16 


Copyright,  1916 

BY 
CALLAGHAN   &   COMPANY 


BOALT  HALL 


PREFATORY  NOTE 


Some  experience  with  anti-trust  litigation,  some  contact  with 
men  in  the  industrial  world  who  were  spending  days  upon  the 
witness  stand  relating  the  ways  and  means  by  which  great  busi- 
ness enterprises  had  been  built  up,  and  some  knowledge  of  the 
trials  and  tribulations  of  business  men  in  conducting  their  busi- 
ness according  to  law,  caused  me  to  conclude  that  a  subject  of 
the  last  importance  to  the  business  interests  of  the  country  was 
that  of  the  law  relating  to  contracts  and  combinations  in  restraint 
of  trade. 

An  examination  of  the  curricula  of  American  Law  Schools  con- 
vinced me  that  the  subject  had  been  by  them  largely,  if  not 
wholly  neglected.  Students  were  graduated  who  had  no  knowl- 
edge of  or  opinions  about  such  cases  as  the  Northern  Securities 
Case,  or  the  Standard  Oil  Case— to  say  nothing  of  the  princi- 
ples governing  labor  and  business  combinations  and  methods  of 
competition. 

Finally,  I  met  the  amused  contempt  of  eminent  practitioners 
for  law  school  authorities  who  for  ten  years  had  ignored  a  sub- 
ject of  such  vast  importance  developing  in  the  view  of  all  with 
clamorous  publicity. 

I,  therefore,  undertook  at  once  to  do  what  I  could  to  intro- 
duce the  subject  into  the  law  schools  by  preparing  this  case  book 
and  offering  a  course  based  upon  it. 


A.  M.  K. 


ui 


Univ.  of  CaiilornlS 
Withdrawn 


CONTENTS 


CHAPTER  I 
THE  COMMON  LAW 


PAGE 


SECTION 

1.  Contracts  accompanying  the  sale  of  a  business 1 

2.  Contracts  accompanying  the  sale  of  property  reserv- 

ing the  seller's  business 215 

3.  Exclusive  contracts  of  sale  and  purchase 221 

4.  Contractsof  buyers  to  keep  up  the  price  on  re-sale...  251 

5.  Combinations  and  competitive  methods 256 


CHAPTER  II 

THE  SHEEMAN  ANTI-TEUST  ACT 

1.  The  Act  and  its  constitutionality 763 

2.  Contracts  accompanjring  the  sale  of  a  business 781 

3.  Exclusive  contracts  of  sale  and  purchase 799 

4.  Contracts  of  buyers  to  keep  up  the  price  on  re-sale. .  838 

5.  Combinations  and  competitive  methods 862 

a.  Of  transportation  units 862 

b.  Of  trading  and  manufacturing  units 1047 

c.  Of  labor  units  1166 

6.  Who  may  invoke  the  violation  of  the  Sherman  Act. .  .1195 

CHAPTER  in 
The   Clayton   Act 1229 

CHAPTER  TV 
Effect  of  patents  and  copyrights 1246 

V 


TABLE  OF  CASES 

"Names  of  cases  which  make  up  the  body  of  the  collection  and  the  pages 
on  which  the  decisions  may  be  foimd  are  printed  in  italics. 

[references  are  to  pages] 

Addyston  Pipe  &  Steel  Co.  v.  United  States,  175  U.  S.  211 . . 

772,   1047,   648,  763 

Aetna  Ins.  Co.  v.  Commonwealth,  106  Ky.  864 616 

Alexander  v.  Searcy,  81  Ga.  536 137 

Alger  V.  Thacher,  19  Pick.  (Mass.)  51 49 

Allen  V.  Flood,  L.  R.  [1898]  App.  Cas.  1 337 

American  Strawboard  Co.  v.  Peoria  Strawboard  Co.,  65  111. 

App.  502  136 

Ames  V.  American  Teleplione  &  Telegraph  Co.,  166  Fed. 

820    1221 

Anchor  Electric  Co.  v.  Hawkes,  171  Mass.  101 81 

Anderson  v.  Jett,  89  Ky.  375 641 

Anheuser-Busch  Brewing  Ass'n  v.  Houck,  27  S.  W.   692 

(Tex.  Civ.  App.) 224,  230 

Arnot  V.  Pittston  &  Elmira  Coal  Co.,  68  N.  Y.  558 224 

Atcheson  v.  Mallon,  43  N.  Y.  147 137 

Badische,  etc.  v.  Sehott,  L.  R.  [1892]  3  Ch.  447 44 

Barnes  &  Co.  v.  Chicago  Typographical  Union,  No.  16,  232 

111.  424 443 

Beal  V.  Chase,  31  Mich.  490 897 

Belding  v.  Pitkin,  2  Caines  (N.  Y.)  147 137 

Bement  v.  National  Harrow  Co.,  186  U.  S.  70 1246 

Berlin  Machine  Works  v.  Perry,  71  Wis.  495 49 

Berry  v.  Donovan,  188  Mass.  353 453 

Bigelow  v.  Calumet  &  Hecla  Min.  Co.,  155  Fed.  869  (s.  e. 

167   Fed.   704,   721) 1195,  105 

-^Bishop  V.  Palmer,  146  Mass.  469 45 

Blindell  v.  Hagan,  54  Fed.  40 1220 

Blount  Mfg.  Co.  V.  Yale  &  Towne  Mfg.  Co.,  166  Fed.  555. .  .1270 

Bohn  Mfg.  Co.  v.  Hollis,  54  Minn.  223 473 

vii 


viii  TABLE  OF  CASES 

[references  are  to  pages] 

Brown  v.  Kounsavell,  78  111.  589 224 

Brown  &  Allen  v.  Jacobs'  Pharmacy  Co.,  115  Ga.  429 496 

Camors-McConnell  Co.  v.  McConnell,  140  Fed.  412.  . .  .176,  794 

Carter-Crame  Co.  v.  Peurrung,  86  Fed.  439 799 

Casey  v.  Cinciimati  Typographical  Union,  45  Fed.  135 444 

Central  New  York  Telephone  &  Telegraph  Co.  v.  Averill, 

199  N.  Y.  128 249 

Central  Ohio  Salt  Co.  v.  Guthrie,  35  Ohio  St.  666 690 

Central  Shade  Roller  Co.  v.  Cushman,  143  Mass.  353 601 

Central    Transp.    Co.    v.    Pullman's   Palace    Car   Co.,    139 

U.  S.  24 137 

Chapin  v.  Brown  Bros.,  83  Iowa  156 138 

Chappel  V.  Brockway,  21  Wend.  (N.  Y.)  157 176 

Chicago  Gas  Light  &  Coke  Co.  v.  People's  Gas  Light  &  Coke 

Co.,  121  lU.  530 735 

Chicago,  St.  L.  &  N.  0.  R.  Co.  v.  Pullman  Southern  Car  Co., 

139  U.  S.  79 237 

Cincinnati,  P.  B.  S.  &  P.  Packet  Co.  v.  Bay,  200  U.  S.  179. .   781 
Clancey  v.  Onondago  Fine  Salt  Mfg.  Co.,  62  Barb.  (N.  Y.) 

395    230 

Clark  V.  Crosby,  37  Vt.  188 224 

Clark  V.  Frank,  17  Mo.  App.  602 256 

Clark  V.  Needham,  125  Mich.  84 196 

demons  v.  Meadows,  123  Ky.  178 185 

Collins  V.  Locke,  L.  R.  4  App.  Cas.  674 298 

Columbia  Wire  Co.  v.  Freeman  Wire  Co.,  71  Fed.  302 1270 

Comer  v.  Burton-Lingo  Co.,  24  Tex.  Civ.  App.  251 794 

Ccmnolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S.  540 1199 

Continental  Securities  Co.  v.  Interborough  Rapid  Transit 

Co.,  165  Fed.  945 1199 

Conthiental  Wall  Paper  Co.  v.  Louis  Voight  &  Sons  Co.,  212 

U.  S.  227 799,  1211 

Conway  v.  Garden  City  Paving  &  Post  Co.,  190  111.  89 136 

Cox  V.  Donnelly,  34  Ark.  762 135 

Craft  V.  McConoughy,  79  111.  346 136 

Crichfield  v.  Bermudez  Asphalt  Paving  Co.,  174  111.  466 136 

Cummings  v.  Union  Blue  Stone  Co.,  164  N.  Y.  401 712 

Curram  v.  Galen,  152  N.  Y.  33 408 

Daniels  v.  Benedict,  50  Fed.  347 135 


TABLE  OF  CASES  ix 

[refeeences  are  to  pages] 
Darius  Cole  Transp.  Co.  v.  White  Star  Line,  186  Fed.  63. .   794 

Davies  v.  Davies,  L.  R.  36  Ch.  Div.  359 44 

Davis  V.  A.  Booth  &  Co.,  131  Fed.  31 176,  794 

Detroit  Salt  Co.  v.  National  Salt  Co.,  134  Mich.  103 230 

DeWitt  Wire-Cloth  Co.  v.  New  Jersey  Wire-Cloth  Co.,  14 

N.  Y.  Supp.  277 472 

Diamond  Match  Co.  v.  Roeher,  106  N.  Y.  473 55,  44,  897  ^ 

Dr.  Miles  Medical  Co.  v.  John  D.  Park  &  Sons  Co.,  220  U.  S. 

373    838  c- 

Dunhar  v.  American  Telephone  &  Telegraph  Co.,  238  111. 

456    i05,  648    c 

Eastern  States  Retail  Lumder  Deailers'  Ass'n  v.   United 

States,  234  U.  S.  600 1157  - 

EUerman  v.    Chicago  Junction   Railways  &  Union   Stock 

Yards  Co.,  49  N.  J.  Eq.  217 897 

Elliman  Sons  Co.  v.  Carrington  &  Son,  L.  R.  [1901]  2  Ch. 

275    256 

Emery  v.  Ohio  Candle  Co.,  47  Ohio  St.  320 716  '^ 

Employing  Printers'  Club  v.  Dr.  Blosser  Co.,  122  Ga.  509.   522 

Erwin  v.  Hayden,  43  A.  W.  610 785 

Espenson  v.  Koepke,  93  Minn.  278 785 

Evans  v.  American  Strawboard  Co.,  114  111.  App.  450 136 

Farrer  v.  Close,  L.  R.  4  Q.  B.  602 286 

Ford  V.  Chicago  Milk  Shippers'  Ass'n,  155  111.  166 712 

Fox  Solid  Pressed  Steel  Co.  v.  Schoen,  77  Fed.  29 94 

French  v.  Parker,  16  R.  I.  219 26  ■ 

Fuller  V.  Hope,  163  Pa.  St.  62 224 

Fuqua  v.  Pabst  Brewing  Co.,  36  S.  W.  479  (Tex.  Civ.  App.) .   224 

Gamewell  Fire  Alarm  Co.  v.  Crane,  160  Mass.  50 50  «- 

Garst  v.  Charles,  187  Mass.  144 256 

Garst  V.  Harris,  177  Mass.  72 .256 

Gates  V.  Hooper,  39  S.  W.  1079 785 

Gibbs  V.  Consolidated  Gas  Co.  of  Baltimore,  130  U.  S.  396. .  721  • 

Oilman  v.  Dwight,  13  Gray  (Mass.)  356 12 

Goodrich  v.  Tenney,  144  111.  422 135 

Gorringe  v.  Reed,  23  Utah  120 135 

Greer  Mills  &  Co.  v.  StoUer,  77  Fed.  1 1221 

Grifdn  &  Connelly  v.  Piper,  55  HI.  App.  213 136 

Grogan  v.  Chaffee,  156  Cal.  611 251  o 


X  TABLE  OF  CASES 

[references  are  to  pages] 

Harding  v.  American  Glucose  Co.,  182  111.  551 105 

Harriman  v.  Northern  Securities  Co.,  197  U.  S.  244 131,  136 

Hawarden  v.  Youghiogheny  &  Lehigh  Coal  Co.,  Ill  Wis. 

545    552 

nilto7i  V.  Eckersley,  6  El.  &  Bl.  47 256 

Hitchcock  V.  Coker,  6  Adol.  &  El.  438 12  t^ 

Hitchcock  V.  Davis,  87  Mich.  629 137 

Hodge  v.  Sloan,  107  N.  Y.  244 215  c^ 

Hooker  v.  Vandewater,  4  Denio  (N.  Y.)  349 694 

Hornby  v.  Close,  L.  R.  2  Q.  B.  153 278  ^ 

Hursen  v.  Gavin,  162  111.  377 12 

India  Bagging  Ass'n  v.  B.  Kock  &  Co.,  14  La.  Ann.  168. . .   717 

Jackson  v.  MitcheU,  13  Ves.  Jr.  581 135 

Jensen  v.  Cooks'  &  Waiters'  Union  of  Seattle,  39  Wash.  531.  444 

Johnson  v.  Cooper,  2  Yerg.  (10  Tenn.)  524 135 

Jones  V.  Fell,  5  Fla.  510 472 

Jones  V.  North,  L.  R.  19  Eq.  426 94 

Judd  V.  Harrington,  139  N.  Y.  105 718^ 

Kahn  v.  Walton,  46  Ohio  St.  195 137 

Kellogg  v.  Larkin,  3  Pin.  (Wis.)  123 142,  224  <^ 

King  V.  Journeymen-Taylors  of  Cambridge,  8  Modern  11 

(1721)    286 

KlingeVs  Pharmacy  v.  Sharp  &  Dohme,  104  Md.  218 590  ^ 

Lange  v.  Werk,  2  Ohio  St.  519 49 

Lawlor  v.  Loewe,  235  U.  S.  522 1191  '^ 

Leonard  v.  Poole,  114  N.  Y.  371 137 

Leslie  V.  Lorillard,  110  N.  Y.  519 65,  8^7  ^ 

Loewe  v.  California  State  Federation  of  Labor,  139  Fed.  71 .   444      | 

Loewe  v.  Lawlor,  208  U.  S.  274 1166  *  ^ 

Long  V.  Towl,  42  Mo.  545 224 

Lord  St.  John  v.  Lady  St.  John,  11  Ves.  Jr.  525 135 

Lufkiu  Rule  Co.  v.  Fringeli,  57  Ohio  St.  596 49 

Macauley  Bros.  v.  Tierney,  19  R.  I.  255 487 ^^ 

McMullen  v.  Hoffman,  174  U.  S.  639 136 

MandeviUe  v.  Harman,  42  N.  J.  Eq.  185 32 

Mapes  V.  Metcalf,  10  N.  D.  601 , .     77 

Martell  v.  White,  185  Mass.  255 478  ^ 

Martin  v.  McFall,  65  N.  J.  Eq.  91 444 

Master  Stevedores'  Ass'n  v.  Walsh,  2  Daly  (N.  Y.)  1 588  c^ 


TABLE  OF  CASES  id 

[references  are  to  pages] 

Meech  v.  Lee,  82  Mich.  274 135 

Meredith  v.  New  Jersey  Zinc  &  Iron  Co.,  55  N.  J.  Eq.  211. .     81 
Miles  Medical  Co.  v.  Dr.  John  D.  Park  &  Sons  Co.,  220  U.  S. 

373    838 

Milwaukee  Masons'  &  Builders'  Ass'n  v.  Niezerowski,  95 

Wis.  129    642 

Mitchel  V.  Reynolds,  1  Peere-Williams,  181 1 

Mognl  Steamship  Co.  v.  McGregor,  Gow  &  Co.,  L.  K.  [1892] 

App.  Cas.  25 309 

Montague  v.  Lowry,  193  U.  S.  38 1049 

More  V.  Bennett,  140  111.  69 463 

Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173 .. .   680 

Nash  V.  United  States,  229  U.  S.  373 1152 

National  Benefit  Co.  v.  Union  Hospital  Co.,  45  Minn.  212.94,  897 
National  Enameling  &  Stamping  Co.  v.  Haberman,  120  Fed. 

415    44 

National  Fireproofing  Co.  v.  Mason  Builders'  Ass'n,  169 

Fed.    259 522,  1221 

National   Harrow   Co.   v.   Bement  &   Sons,   21    App.    Div, 

(N.  Y.)   290 1270 

National  Protective  Ass'n  v.  Cumming,  170  N.  Y.  315 413 

Nester  v.  Continental  Brewing  Co.,  161  Pa.  St.  473 472 

Newell  V.  Meyendorff,  9  Mont.  254 221 

New  York  Ice  Co.  v.  Parker,  21  How.  Pr.  (N.  Y.)  302 256 

Nordenfelt  v.  Maxim  Nordenfelt  Guns  &  Ammwiition  Co., 

[1894]   App.  Cas.  535 33 

Northern  Securities  Co.  v.  United  States,  193  U.  S.  191.910,  131 
North   Western  Salt  Co.  v.  Electrolytic  Alkali  Co.,  L.  R. 

[1914]  App.  Cas.  461 286 

Oakdale  Mfg.  Co.  v.  Garset,  18  R.  I.  484 78 

Old  V.  Robson,  62  L.  T.  N.  S.  282 286 

Ontario  Salt  Co.  v.  Merchants  Salt  Co.,  18  Grant  (U.  C.) 

540    616 

Pacific  Factor  Co.  v.  Adler,  90  Cal.  110 224,  230 

Park  &  Sons  Co.  v.  National  Wholesale  Druggists'  Ass'n, 

175  N.  Y.  1 553 

People  V.  Chicago  Gas  Trust  Co.,  130  HI.  268 735 

People  V.  Fisher,  14  Wend.  (N.  Y.)  10 440 

People  V.  MUk  Exchange,  Ltd.,  145  N.  Y.  267 707 


xii  TABLE  OF  CASES 

[references  are  to  pages] 
People  V.  Nussbaum,  32  Misc.  (N.  Y.)  1,  66  N.  Y.  Supp.  129.   138 

People  V.  Sheldon,  139  N.  Y.  251 695 

Perry  v.  United  States  School  Furniture  Co.,  232  111.  101. .   136 

Pidcock  V.  Harrington,  64  Fed.  821 1219  ■ 

Pittsburg  Carbon  Co.  v.  MclMiUin,  119  N.  Y.  46 694 

Pullman's  Palace-Car  Co.  v.  Central  Transp.  Co.,  171  U.  S. 

138 135 

Queen  Im.  Co.  v.  State,  86  Tex.  250 605 

Quinn  v.  Leathern,  L.  R.  [1901]  App.  Cas.  495 347  . 

Rafferty  v.  Buffalo  City  Gas  Co.,  37  App.  Div.  (N.  Y.)  618. .  762 

Richards  v.  American  Desk  &  Seating  Co.,  87  Wis.  503 897 

RoUer  v.  Ott,  14  Kan.  609 224 

Rousillon  V.  RousiUon,  14  Ch.  Div.  351 44 

Rucker  v.  Wynne,  2  Head  (Tenn.)  617 135 

St.  Louis,  y.  &  T.  H.  R.  Co.  v.  Terre  Haute  &  I.  R.  Co.,  145 

U.  S.  393 136,  137 

Santa  Clara  Valley  ]\Iill  &  Lumber  Co.  v.  Hayes,  76  Cal. 

387    230 

Sayre  v.  Louisville  Union  Ben.  Ass'n,  1  Duv.  (Ky.)  143. . .   694 
Schubart  v.  Chicago  Gas  Light  &  Coke  Co.,  41  111.  App.  181. .   136 

Schwalm  v.  Holmes,  49  Cal.  665 224 

Shawnee  Compress  Co.  v.  Anderson,  209  U.  S.  423 ... .  785,  1199 

Skrainka  v.  Scharringhausen,  8  Mo.  App.  522 605 

SneU  V.  Dwight,  120  Mass.  9 137 

Siiow  V.  Wheeler,  113  Mass.  179 400 

Southern  Fire  Brick  &  Clay  Co.  v.  Garden  City  Sand  Co., 

223  ni.  616 230 

Southern  Indiana  Exp,  Co.  v.  United  States  Exp.  Co.,  88 

Fed.  659    1221 

Standard   Oil   Co.   of  New   Jersey   v.    United   States,   221 

U.  S.  1 780,  1072 

Standard  Sanitary  Mfg.  Co.  v.  TJnited  States,  226  U.  S. 

20    1136,  1270 

Stanton  v.  Allen,  5  Denio  (N.  Y.)  434 694 

State  V.  Creamery  Package  Mfg.  Co.,  110  Minn.  415 1270 

State  ex  rel.  Diirncr  v.  Huegin,  110  Wis.  189 536 

State  V.  Standard  Oil  Co.,  49  Ohio  St.  137 649 

Steele  v.  United  Fruit  Co.,  190  Fed.  631 800 

Strait  V.  National  Harrow  Co.,  18  N.  Y.  Supp.  224 1246 


TABLE  OF  CASES  xiii 

[references  are  to  pages] 

Stravs  V.  American  Puhlishers'  Ass'n,  231  U.  S.  222 1273 

Superior  Coal  Co.  v.   E.  R.  Darlington  Lumber  Co.,  236 

111.  83  224 

Stvift  &  Co.  V.  United  States,  196  U.  S.  375 1056 

Taylor  v.  Blanchard,  13  Allen  (Mass.)  370 49 

Texas  Standard  Oil  Co.  v.  Adoue,  83  Tex.  650 472 

Thomas  v.  Brownville,  Ft.  K.  &  P.  Ry.  Co.,  2  Fed.  877 137 

TJiomas  v.   Cincinnati,  N.  0.  &  T.  P.  Ry.  Co.,  62  Fed. 

803     407,  444 

Thomas  v.  Miles'  Adm'r,  3  Ohio  St.  274 49 

Trenton  Potteries  Co.  v.  Oliphant,  58  N.  J.  Eq.  507 161 

Tuscaloosa  Ice  Mfg.  Co.  v.  Williams,  127  Ala.  110 176 

Twomey  v.  People's  Ice  Co.,  66  Cal.  233 224 

Union  Trust  &  Savings  Bank  v.  Kinloch  Long-Distance  Tel. 

Co.,  258  111.  202 242 

United  States  v.  Addyston  Pipe  &  Steel  Co.,  85  Fed.  271. . .   625 

United  States  v.  American  Tobacco  Co.,  221  U.  S.  106 1136 

United  States  v.  Joint-Traffic  Ass'n,  171  U.  S.  505 765,  904 

United  States  v.  Kissel  &  Earned,  218  U.  S.  601 1068 

United  States  v.  E.  C.  Knight  Co.,  156  U.  S.  1 763 

United  States  v.  Nelson,  52  Fed.  646 624 

United  States  v.  Pacific  &  Arctic  By.  &  Nav.  Co.,  228  U.  S. 

87    1035 

United  States  v.  Reading  Co.,  226  U.  S.  324 1004 

United  States  v.  Terminal  R.  R.  Ass'n,  of  St.  Louis,  224 

U.  S.  383  962 

United  States  v.  Trans-Missouri  Freight  Ass'n,  166  U.  S. 

290    862 

United  States  v.  Union  Pac.  R.  Co.,  226  U.  S.  61,  470 981 

United  States  v.  Winslow,  227  U.  S.  202 1270 

United  States  Chemical  Co.  v.  Provident  Chemical  Co.,  64 

Fed.  946   98 

Urmston  v.  Whitelegg  Bros.,  63  L.  T.  N.  S.  455 472 

Vegelahn  v.  Guntncr,  167  Mass.  92 440 

Vulcan    Powder    Co.    v,    Hercules    Powder    Co.,    96    Cal. 

510    694,  1270 

Wabash  R.  Co.  v.  Hamiahan,  121  Fed.  563 408 

West  Virginia  Transp.  Co.  v.  Ohio  River  Pipe  Line  Co., 

22  W.  Va.  600 196 


xiv  TABLE  OF  CASES 

[references  are  to  pages] 

Western  Wooden-Ware  Ass^n  v.  Starkey,  84  Mich.  76 189 

Wheeler  v.  Russell,  17  Mass.  258 137 

Whittinghara  v.  Burgoyne,  3  Anst.  Rep.  900 135 

Wickens  v.  Evmis,  3  Younge  &  Jervis,  318 84 

Wilder  Mfg.  Co.  v.  Corn  Products  Refining  Co.,  236  U.  S. 

165    1211 

Wiley  V.  Baumgardner,  97  Ind.  66 49 

Wood  V.  Whitehead  Bros.  Co.,  165  N.  Y.  545 72 

Woodstock  Iron  Co.  v.  Richmond  &  D.  Extension  Co.,  129 

U.  S.  643 137 


CASES  ON 

CONTRACTS  IN  RESTRAINT  OF  TRADE  AND 
ILLEGAL  COMBINATIONS 


CHAPTER  I 
THE  COMMON  LAW 

Section  1 

CONTRACTS   ACCOMPANYING   THE   SALE   OF   A  BUSINESS 

MITCIIEL  V.  REYNOLDS 
(King's  Bench,  1711.     1  Peere-Williams,  181.) 

Debt  Upon  a  Bond.  The  defendant  prayed  oyer  of  the  con- 
dition, which  recited  that,  whereas  the  defendant  had  assigned 
to  the  plaintiff  a  lease  of  a  messuage  and  bakehouse  in  Liquor- 
pond  Street,  in  the  parish  of  St.  Andrew's  Holborn,  for  the 
term  of  five  years :  now  if  the  defendant  should  not  exercise  the 
trade  of  a  baker  within  that  parish  during  the  said  term,  or,  in 
ease  he  did,  should  within  three  days  after  proof  thereof  made, 
pay  to  the  plaintiff  the  sum  of  fifty  pounds,  then  the  said  obliga- 
tion to  be  void.  Quibus  lectis  &  auditus,  he  pleaded,  that  he  was 
a  baker  by  trade,  that  he  had  served  an  apprenticeship  to  it, 
ratione  cujus  the  said  bond  was  void  in  law,  per  quod  he  did 
trade,  prout  ei  bene  licuit.  Whereupon  the  plaintiff'  demurred 
in  law. 

And  now,  after  this  matter  had  been  several  times  argued  at 
the  bar,  Parker,  C.  J.,  delivered  the  resolution  of  the  court. 

The  general  question  upon  this  record  is,  whether  this  bond, 
being  made  in  restraint  of  trade,  be  good? 

And  we  are  all  of  opinion,  that  a  special  consideration  being 
set  forth  in  the  condition,  which  shews  it  was  reasonable  for  the 

1 


;J  Ij  COMBINATIONS  AND  RESTRAINT  OF  TRADE 

parties  to  enter  into  it,  the  same  is  good;  and  that  the  true  dis- 
tinction of  this  case  is,  not  between  promises  and  bonds,  but 
between  contracts  with  and  with&ut  consideration ;  and  that 
wherever  a  sufficient  consideration  appears  to  make  it  a  proper 
and  an  useful  contract,  and  such  as  cannot  be  set  aside  without 
injury  to  a  fair  contractor,  it  ought  to  be  maintained;  but  with 
this  constant  diversity,  viz.  where  the  restraint  is  general  not 
to  exercise  a  trade  throughout  the  kingdom,  and  where  it  is 
limited  to  a  particular  place;  for  the  former  of  these  must  be 
void,  being  of  no  benefit  to  either  party,  and  only  oppressive,  as 
shall  be  shewn  by  and  by. 

The  resolutions  of  the  books  upon  these  contracts  seeming  to 
disagree,  I  will  endeavour  to  state  the  law  upon  this  head,  and 
to  reconcile  the  jarring  opinions;  in  order  whereunto,  I  shall 
proceed  in  the  following  method: — 

First.  Give  a  general  view  of  the  cases  relating  to  the 
restraint  of  trade. 

Secondly.     Make  some  observations  from  them. 

Thirdly.  Shew  the  reasons  of  the  differences  which  are  to  be 
found  in  these  cases ;  and 

Fourthly.     Apply  the  whole  to  the  case  at  bar. 

As  to  the  cases,  they  are  either,  first,  of  involuntary  contracts, 
against,  or  without,  a  man's  own  consent;  or  secondly,  of  volun- 
tary restraints  by  agreement  of  the  parties. 

Involuntary  restraints  may  be  reduced  under  these  heads: — 

First.     Grants  or  charters  from  the  crown. 

Secondly.     Customs. 

Thirdly.     By-laws. 

Grants  or  charters  from  the  crown  may  be — 

First.  A  new  charter  of  incorporation  to  trade  generally, 
exclusive  of  all  others,  and  this  is  void.     8  Co.  121. 

Secondly.  A  grant  to  particular  persons  for  the  sole  exer- 
cise of  any  known  trade ;  and  this  is  void,  because  it  is  a  monop- 
oly, and  against  the  policy  of  the  common  law,  and  contrary  to 
Magna  Charta.     11  Co.  84, 

Thirdly.  A  grant  of  the  sole  use  of  a  new  invented  art,  and 
this  is  good,  being  indulged  for  the  encouragement  of  ingenuity ; 
but  this  is  tied  up  by  the  statute  of  21  Jac.  1,  cap.  3,  sec.  6,  to 
the  term  of  fourteen  years;  for  after  that  time  it  is  presumed 
to  be  a  known  trade,  and  to  have  spread  itself  among  the  people. 


THE  COMMON  LAW  3 

Restraints  by  custom  are  of  three  sorts : — 

First.  Such  as  are  for  the  benefit  of  some  particular  persons, 
who  are  alleged  to  use  a  trade  for  the  advantage  of  a  community, 
which  are  good.  8  Co.  125 ;  Cro.  Eliz.  803 ;  1  Leon.  142 ;  Mich. 
22  H.  6,  14 ;  2  Bulst.  195 ;  1  Roll.  Abr.  561. 

Secondly.  For  the  benefit  of  a  community  of  persons  who  are 
not  alleged,  but  supposed  to  use  the  trade,  in  order  to  exclude 
foreigners.  Dyer,  279b ;  W.  Jones,  162 ;  8  Co.  121 ;  11  Co.  52 ; 
Carter,  68,  114,  held  good. 

Thirdhj.  A  custom  may  be  good  to  restrain  a  trade  in  a  par- 
ticular place,  though  none  are  either  supposed  or  alleged  to  use 
it ;  as  in  the  case  of  Rippon,  Register,  105,  106. 

Restraints  of  trade  by  by-laws  are  these  several  ways : — 

First.  To  exclude  foreigners;  and  this  is  good,  if  only  to  en- 
force a  precedent  custom  by  a  penalty.  Carter,  68,  114;  8  Co. 
125.1  B^^t  where  there  is  no  precedent  custom,  such  by-law  is 
void.  1  Roll.  Abr.  364;  Hob.  210;  1  Bulst.  11;  3  Keb.  8O8.2 
But  the  case  in  Keble  is  misreported ;  for  there  the  defendants 
did  not  plead  a  custom  to  exclude  foreigners,  but  only  generally 
to  make  by-laws,  which  was  the  ground  of  the  resolution  in  that 
case. 

Secondly.  All  by-laws  made  to  cramp  trade  in  general,  are 
void.    Moor,  576 ;  2  Inst.  47 ;  1  Bulst.  11. 

Thirdly.  By-laws  made  to  restrain  trade,  in  order  to  the  bet- 
ter government  and  regulation  of  it,  are  good,  in  some  cases,-"^ 
(viz.)  if  they  are  for  the  benefit  of  the  place,  and  to  avoid  pub- 
lic inconveniences,  nuisances,  etc.  Or  for  the  advantage  of  the 
trade,  and  improvement  of  the  commodity.  Sid.  284;  Raym. 
288 ;  2  Keb.  27,  873 ;  and  5  Co  62b,  which  last  is  upon  the  by- 
law for  bringing  all  broad-cloth  to  Blackwell  Hall,  there  to  be^ 
viewed  and  marked,  and  to  pay  a  penny  per  piece  for  marking : 
this  was  held  a  reasonable  by-law;  and  indeed  it  seems  to  be 
only  a  fixing  of  the  market;  for  one  end  of  all  markets  is,  that 
the  commodity  may  be  viewed;  but  then  they  must  not  make 
people  pay  unreasonably  for  the  liberty  of  trading  there. 

1 — Wolley  V.  Idle,  4  Burr.   1951.  3— Wannell    v.    Chamber    of    the 

(Eep.)  City  of   London,   1   Stra.   675;    The 

2 — Vide    Harrison    v.    Godman,    1  King    v.    Harrison,    3    Burr.    1322; 

Burr.   12;    Hesketh   v.   Braddock,   3  Pierce     v.     Bartrum,     Cowp.     269. 

Burr.     (Rep.)  (Eep.) 


4        COMBINATIONS  AND  RESTRAINT  OF  TRADE 

In  2  Keb.  309,  the  case  is  upon  a  by-law  for  restraining  silk- 
throwsters  from  using  more  than  such  a  certain  number  of 
spindles,  and  there  the  by-law  would  have  been  good,  if  the 
reasons  given  for  it  had  been  true. 

Voluntary  restraints  by  agreement  of  the  parties,  are  either : — 

First.    General,  or 

Secondly.    Particular,  as  to  places  or  persons. 

General  restraints  are  all  void,  whether  by  bond,  covenant,  or 
promise,  etc.,  with  or  without  consideration,  and  whether  it  be 
of  the  party's  own  trade,  or  not.  Cro.  Jac.  596;  2  Bulst.  136; 
Aleyn,  67. 

Particular  restraints  are  either,  first,  without  consideration, 
all  which  are  void  by  what  sort  of  contract  soever  created.  2  H. 
5.  5.  Moor,  115,  242 ;  2  Leon.  210 ;  Cro.  Eliz.  872 ;  Noy,  98 ;  Owen, 
143;  2  Keb.  377;  March,  191;  Show.  2  (not  well  reported)  ;  2 
Saund.  155. 

Or  secondly,  particular  restraints  are  with  consideration. 

Where  a  contract  for  restraint  of  trade  appears  to  be  made 
upon  a  good  and  adequate  consideration,  so  as  to  make  it  a 
proper  and  useful  contract,  it  is  good.  2  Bulst.  136,  Rogers  v. 
Parry.  Though  that  case  is  wrong  reported,  as  appears  by  the 
roll  which  I  have  caused  to  be  searched,  it  is  B.  R.  Trin.  11  Jac. 
1 ;  Rot.  223.  And  the  resolution  of  the  judges  was  not  grounded 
upon  its  being  a  particular  restraint,  but  upon  its  being  a  par- 
ticular restraint  with  a  consideration,  and  the  stress  lies  on  the 
words,  as  the  case  is  here,  though,  as  they  stand  in  the  book, 
they  do  not  seem  material.  Noy,  98 ;  W.  Jones,  13,  Cro.  Jac.  596. 
In  that  case,  all  the  reasons  are  clearly  stated,  and,  indeed,  all 
the  books,  when  carefully  examined,  seem  to  concur  in  the  dis- 
tinction of  restraints  general,  and  restraints  particular,  and 
with  or  without  consideration,  which  stands  upon  very  good 
foundation ;  Volenti  nan  fit  injuria;  a  man  may,  upon  a  valu- 
able consideration,  by  his  own  consent,  and  for  his  own  profit, 
give  over  his  trade;  and  part  with  it  to  another  in  a  particular 
place. 

Palm.  172,  Bragg  v.  Stanner.  The  entering  upon  the  trade, 
and  not  whether  the  right  of  action  accrued  by  bond,  promise  or 
covenant,  was  the  consideration  in  that  case. 

Vide  March's  Rep.  77,  but  more  particularly  Aleyn 's,  67, 
where  there  is  a  very  remarkable  case,  which  lays  down  this 


THE  COMIION  LAW  5 

distinction,  and  puts  it  upon  the  consideration  and  reason  of 
the  thing. 

Secondly.  I  come  now  to  make  some  observations  that  may 
be  useful  in  the  understanding  of  these  cases.    And  they  are : — 

First.  That  to  obtain  the  sole  exercise  of  any  known  trade 
throughout  England,  is  a  complete  monopoly,  and  against  the 
policy  of  the  law. 

Secondly.  That  when  restrained  to  particular  places  or  per- 
sons (if  lawfully  and  fairly  obtained),  the  same  is  not  a 
monopoly. 

Thirdly.  That  since  these  restraints  may  be  by  custom,  and 
custom  must  have  a  good  foundation,  therefore  the  thing  ia  not 
absolutely,  and  in  itself,  unlawful. 

Fourthly.  That  it  is  lawful  upon  good  consideration,  for  a 
man  to  part  with  his  trade. 

Fifthly.  That  since  actions  upon  the  case  are  actions  injuri- 
arimi,  it  has  been  always  held,  that  such  actions  will  lie  for  a 
man's  using  a  trade  contrary  to  custom,  or  his  own  agreement; 
for  there  he  uses  it  injuriously. 

Sixthly.  That  where  the  law  allows  a  restrairft  of  trade,  it 
is  not  unlawful  to  enforce  it  with  a  penalty. 

Seventhly.  That  no  man  can  contract  not  to  use  his  trade 
at  all. 

Eighthly.  That  a  particular  restraint  is  not  good  without 
just  reason  and  consideration. 

Thirdly.  I  proposed  to  give  the  reasons  of  the  differences 
which  we  find  in  the  cases;  and  this  I  will  do. 

First.     With  respect  to  involuntary  restraints,  and 

Secondly.    With  regard  to  such  restraints  as  are  voluntary. 

As  to  involuntary  restraints,  the  first  reason  why  such  of 
these,  as  are  created  by  grants  and  charters  from  the  Crown 
and  by-laws,  generally  are  void,  is  drawn  from  the  encourage- 
ment which  the  law  gives  to  trade  and  honest  industry,  and  that 
they  are  contrary  to  the  liberty  of  the  subject. 

Secondly.  Another  reason  is  drawn  from  Magna  Charta, 
which  is  infringed  by  these  acts  of  power;  that  statute  says, 
nullus  liber  homo,  etc.,  disseisetur  de  lihero  tenemento  vel  liber- 
tatihus,  vel  liheris  consuetudinihics  siiis,  etc.,  and  these  words 
have  been  always  taken  to  extend  to  freedom  of  trade. 

But  none  of  the  cases  of  customs,  by-laws  to  enforce  these 


6        COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

customs,  and  patents  for  the  sole  use  of  a  new  invented  art,  are 
within  any  of  these  reasons;  for  here  no  man  is  abridged  of  his 
liberty,  or  disseised  of  his  freehold;  a  custom  is  lex  loci,  and 
foreigners  have  no  pretence  of  right  in  a  particular  society, 
exempt  from  the  laws  of  that  society;  and  as  to  new  invented 
arts,  nobody  can  be  said  to  have  a  right  to  that  which  was  not 
in  being  before;  and  therefore  it  is  but  a  reasonable  reward  to 
ingenuity  and  uncommon  industry. 

I  shall  shew  the  reason  of  the  differences  in  the  cases  of  volun- 
tary restraint. 

First.    Negatively. 

Secondly.    Affirmatively. 

First.  Negatively;  the  true  reason  of  the  disallowance  of 
these  in  any  case,  is  never  drawn  from  Magma  Charta;  for  a 
man  may,  voluntarily,  and  by  his  own  act,  put  himself  out  of 
the  possession  of  his  freehold;  he  may  sell  it,  or  give  it  away 
at  his  pleasure. 

Secondly.  Neither  is  it  a  reason  against  them,  that  they  are 
contrary  to  the  liberty  of  the  subject;  for  a  man  may,  by  his 
own  consent,  for  a  valuable  consideration,  part  with  his  liberty; 
as  in  the  case  of  a  convenant  not  to  erect  a  mill  upon  his  own 
lands.  W.  Jones,  13,  Mick  4  Ed.  3,  57.  And  when  any  of 
these  are  at  any  time  mentioned  as  reasons  upon  the  head  of 
voluntary  restraints,  they  are  to  be  taken  only  as  general  in- 
stances of  the  favour  and  indulgence  of  the  law  to  trade  and 
industry. 

Thirdly.  It  is  not  a  reason  against  them,  that  they  are 
against  law,  I  mean,  in  a  proper  sense,  for  in  an  improper  sense 
they  are. 

All  the  instances  of  conditions  against  law  in  a  proper  sense, 
are  reducible  under  one  of  these  heads. 

First.  Either  to  do  something  that  is  malum  in  se,  or  malum 
proMbitum.    1  Inst.  206. 

Secondly.  To  omit  the  doing  of  something  that  is  a  duty. 
Palm.  172 ;  12,  Norton  v.  Sims. 

Thirdly.  To  encourage  such  crimes  and  omissions.  Fitzherb. 
tit  Obligation,  13 ;  Bro.  tit  Obligation,  34 ;  Dyer,  118. 

Such  conditions  as  these,  the  law  will  always,  and  without  any 
regard  to  circumstances,  defeat,  being  concerned  to  remove  all 
temptations  and  inducements  to  those  crimes;  and  therefore,  as 


THE  COMMON  LAW  7 

in  1  Inst.  206,  a  feoffment  shall  be  absolute  for  an  unlawful 
condition,  and  a  bond  void.    But  from  hence  I  would  infer : — 

First.  That  where  there  may  be  a  way  found  out  to  perform 
the  condition,  without  a  breach  of  the  law,  it  shall  be  good. 
Hob.  12;  Cro.  Car.  22;  Perk.  228. 

Secondly.  That  all  things  prohibited  by  law,  may  be  re- 
strained by  condition ;  and  therefore  these  particular  restraints 
of  trade,  not  being  against  law,  in  a  proper  sense,  as  being 
neither  mala  in  se,  nor  iiwla  prohibit  a,  and  the  law  allowing 
them  in  some  instances,  as  in  those  of  customs  and  assumpsits, 
they  may  be  restrained  by  condition. 

Secondly.  AiSrmatively ;  the  true  reasons  of  the  distinction 
upon  which  the  judgments  in  these  cases  of  voluntary  restraints 
are  founded  are,  first,  the  mischief  which  may  arise  from  them, 
first,  to  the  party,  by  the  loss  of  his  livelihood,  and  the  subsist- 
ence of  his  family;  secondly,  to  the  public,  by  depriving  it  of 
an  useful  member. 

Another  reason  is,  the  great  abuses  these  voluntary  restraints 
are  liable  to;  as  for  instance,  from  corporations,  who  are  per- 
petually labouring  for  exclusive  advantages  in  trade,  and  to 
reduce  it  into  as  few  hands  as  possible ;  as  likewise  from  masters, 
who  are  apt  to  give  their  apprentices  much  vexation  on  this 
account,  and  to  use  many  indirect  practices  to  procure  such 
bonds  from  them,  lest  they  should  prejudice  them  in  their 
custom,  when  they  come  to  set  up  for  themselves. 

Thirdly.  Because  in  a  great  many  instances,  they  can  be  of 
no  use  to  the  obligee ;  which  holds  in  all  cases  of  general  restraint 
throughout  England ;  for  what  does  it  signify  to  a  tradesman  in 
London,  what  another  does  at  Newcastle?  and  surely  it  would 
be  unreasonable  to  fix  a  certain  loss  on  one  side,  without  any 
benefit  to  the  other.  The  Roman  law  would  not  inforce  such 
contracts  by  an  action.    See  Puff.^  lib.  5,  c.  2,  ^ec.  3 ;  21  H.  7,  20. 

Fourthly.  The  fourth  reason  is  in  favour  of  these  contracts, 
and  is,  that  there  may  happen  instances  wherein  they  may  be 
useful  and  beneficial,  as  to  prevent  a  town  from  being  over- 
stocked with  any  particular  trade;  or  in  case  of  an  old  man, 

4 — The  instances  there  mentioned  no  need  to  trouble  a  magistrate  on 

are,  that  if  any  should  agree  not  to  the  breach  of  such  agreements,  which 

wash   their    hands,   or    change   their  would  tend  to  no  consequence  when 

linen,  for  such  a  time,  there  could  be  put  in  execution.     (Kep.) 


8        COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

who  finding  himself  under  such  circumstances  either  of  body 
or  mind,  as  that  he  is  likely  to  be  a  loser  by  continuing  his  trade, 
in  this  case  it  will  be  better  for  him  to  part  with  it  for  a  con- 
sideration, that  by  selling  his  custom,  he  may  procure  to  himself 
a  liveliliood,  which  he  might  probably  have  lost,  by  trading 
longer. 

Fifthly.  The  law  is  not  so  unreasonable,  as  to  set  aside  a 
man's  own  agreement  for  fear  of  an  uncertain  injury  to  him, 
and  fix  a  certain  damage  upon  another;  as  it  must  do,  if  con- 
tracts with  a  consideration  were  made  void.  Barrow  v.  Wood, 
March's  Rep.  77;  Mich.  7  Ed.  3,  65;  Aleyn,  67;  8  Co.  121. 

But  here  it  may  be  made  a  question,  that  suppose  it  does  not 
appear  whether  or  no  the  contract  be  made  upon  good  considera- 
tion, or  be  merely  injurious  and  oppressive,  what  shall  be  done 
in  this  case? 

Besp.  I  do  not  see  why  that  should  not  be  shewn  by  plead- 
ing; though  certainly  the  law  might  be  settled  either  way  with- 
out prejudice;  but  as  it  now  stands  the  rule  is,  that  wherever 
such  contract  stat  indifferenter,  and  for  ought  appears,  may  be 
either  good  or  bad,  the  law  presumes  it  prima  facie  to  be  bad, 
and  that  for  these  reasons: — 

First.    In  favour  of  trade  and  honest  industry. 

Secondly.  For  that  there  plainly  appears  a  mischief,  but  the 
benefit  (if  any)  can  be  only  presumed;  and  in  that  case,  the 
presumptive  benefit  shall  be  over-borne  by  the  apparent  mischief. 

Thirdly.  For  that  the  mischief  (as  I  have  shewn  before)  is 
not  only  private,  but  public. 

Fourthly.  There  is  a  sort  of  presumption,  that  it  is  not  of 
any  benefit  to  the  obligee  himself,  because,  it  being  a  general 
mischief  to  the  public,  every  body  is  affected  thereby;  for  it  is 
to  be  observed,  that  though  it  be  not  shewn  to  be  the  party's 
trade  or  livelihood,  or  that  he  had  no  estate  to  subsist  on,  yet 
all  the  books  condemn  tliose  bonds  on  that  reason  (viz.)  as 
taking  away  the  obligor's  livelihood,  which  proves  that  the  law 
presumes  it;  and  this  presumption  answers  all  the  difficulties 
that  are  to  be  found  in  the  books. 

As  first,  That  all  contracts,  where  there  is  a  bare  restraint 
of  trade  and  no  more,  must  be  void ;  but  this  taking  place  only 
where  the  consideration  is  not  shewn  can  be  no  reason  why,  in 
cases  where  the  special  matter  appears  so  as  to  make  it  a  rea- 


THE  COMMON  LAW  9 

sonable  and  useful  contract,  it  should  not  be  good ;  for  there  the 
presumption  is  excluded,  and  therefore  the  courts  of  justice 
will  inforce  these  latter  contracts,  but  not  the  former. 

Secondly.  It  answers  the  objection,  that  a  bond  does  not 
want  a  consideration,  but  is  a  perfect  contract  without  it;  for 
the  law  allows  no  action  on  a  nudum  pactum,  but  every  con- 
tract must  have  a  consideration,  either  expressed,  as  in  assump- 
sits, or  implied,  as  in  ho^ids  and  covenants,  but  these  latter, 
though  they  are  perfect  as  to  the  form,  yet  may  be  void  as  to  the 
matter;  as  in  a  covenant  to  stand  seized,  which  is  void  without 
a  consideration,  though  it  be  a  complete  and  perfect  deed. 

Thirdly.  It  shews  why  a  contract  not  to  trade  in  any  part 
of  England,  though  with  consideration,  is  void;  for  there  is 
something  more  than  a  presumption  against  it,  because  it  can 
never  be  useful  to  any  man  to  restrain  another  from  trading  in 
all  places,  though  it  may  be,  to  restrain  him  from  trading  in 
some,  unless  he  intends  a  monopoly,  which  is  a  crime. 

Fourthly.  This  shews  why  promises  in  restraint  of  trade 
have  been  held  good;  for  in  those  contracts,  it  is  always  neces- 
sary to  shew  the  consideration,  so  that  the  presumption  of 
injury  could  not  take  place,  but  it  must  be  governed  by  the 
special  matter  shewn.  And  it  also  accounts  not  only  for  all  the 
resolutions,  but  even  all  the  expressions  that  are  used  in  our 
books  in  these  cases;  it  at  least  excuses  the  vehemence  of  Judge 
Hall  in  2  H.  5,  fol.  quinto;  for  suppose  (as  that  case  seems  to 
be)  a  poor  weaver,  having  just  met  with  a  great  loss,  should, 
in  a  fit  of  passion  and  concern,  be  exclaiming  against  his  trade, 
and  declare,  that  he  would  not  follow  it  any  more,  etc.,  at  which 
instant,  some  designing  fellow  should  work  him  up  to  such  a 
pitch,  as,  for  a  trifling  matter,  to  give  a  bond  not  to  work  it 
again,  and  afterwards,  when  the  necessities  of  his  family,  and 
the  cries  of  his  children,  send  him  to  the  loom,  should  take 
advantage  of  the  forfeiture,  and  put  the  bond  in  suit;  I  must 
own,  I  think  this  such  a  piece  of  villainy,  as  is  hard  to  find  a 
name  for;  and  therefore  cannot  but  approve  of  the  indignation 
that  judge  expressed,  though  not  his  manner  of  expressing  it.^ 

5 — Hall    expressed    himself   thus:  tre   common   ley,  4'   V^'"'  Dieu  si  le 

A    ma   intent   vous   purres  aver   de-  plaintiff  fuit   icy,  il  irra  al  prison 

murre  sur  luy  que  le  ohligation  est  tanq;  il  ust  fait  fine  au  Eoy.  (Rep.) 
void,  eo  que  le  condition  est  encoun- 


10      COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

Surely  it  is  not  fit  that  such  unreasonable  mischievous  contracts 
should  be  countenanced,  much  less  executed  by  a  court  of 
justice. 

As  to  the  general  indefinite  distinction  made  between  bonds 
and  promises  in  this  case,  it  is  in  plain  words  tliis,  that  the 
agreement  itself  is  good,  but  when  it  is  reduced  into  the  form 
of  a  bond,  it  immediately  becomes  void;  but  for  what  reason, 
see  3  Lev.  241.  Now  a  bond  may  be  considered  two  ways,  either 
as  a  security,  or  as  a  compensation;  and — 

F'kst.  Why  should  it  be  void  as  a  security?  Can  a  man  be 
bound  too  fast  from  doing  an  injury?  which  I  have  proved  the 
using  of  a  trade  contrary  to  custom  or  promise,  to  be. 

Secondly.  Why  should  it  be  void  as  a  compensation?  Is 
there  any  reason  why  parties  of  full  age,  and  capable  of  con- 
tracting, may  not  settle  the  quantum  of  damages  for  such  an 
injury  ?    Bract,  lib.  3,  c.  2,  §  4. 

It  would  be  very  strange,  that  the  law  of  England,  that  ^  de- 
lights so  much  in  certainty,  should  make  a  contract  void,  when 
reduced  to  certainty,  which  was  good  when  loose  and  uncertain ; 
the  cases  in  March's  Rep.  77,  191,  and  also  Show.  2,  are  but 
indifferently  reported,  and  not  warranted  by  the  authorities 
they  build  upon. 

First  Objection.  In  a  bond  the  whole  penalty  is  to  be  re- 
covered, but  in  assumpsit  only  the  damages. 

Resp.  This  objection  holds  equally  against  all  bonds  whatso- 
ever. 

Second  Objection.  Another  objection  was,  that  this  is  like 
the  case  of  an  infant,  who  may  make  a  promise  but  not  a  bond, 
or  that  of  a  sheriff  who  cannot  take  a  bond  for  fees. 

Resp.  The  case  of  an  infant  stands  on  another  reason  (viz.) 
a  general  disability  to  make  a  deed;  but  here  both  parties  are 
capable;  neither  is  it  the  nature  of  the  bond,  but  merely  the 
incapacity  of  the  iniant,  which  makes  a  bond  by  him  void,  since 
there  a  surety  would  be  liable ;  but  it  is  otherwise  here. 

Also  the  case  of  a  sheriff  is  very  different ;  for  at  common  law 
he  could  take  nothing  for  doing  his  duty,  but  the  statute  has 
given  him  certain  fees;  but  he  can  neither  take  more,  nor  a 
chance  for  more,  than  that  allows  him. 

6 — Post  Grantham  v.  Gordon,  1  P. 
Wms.  612,  614.     (Eep.) 


THE  COMMON  LAW  U 

Third  Objecti&n.  It  was  further  objected,  that  a  promise  is 
good,  and  a  bond  void,  because  the  former  leaves  the  matter 
more  at  large  to  be  tried  by  a  jury;  but  what  is  there  to  be  tried 
by  a  jury  in  this  case? 

Besp.  First.  It  is  to  be  tried  whether  upon  consideration  of 
the  circumstances  the  contract  be  good  or  not  ?  and  that  is  matter 
of  law,  not  fit  for  a  jury  to  determine. 

Secmidly.  It  is  to  ascertain  the  damages;  but  citi  hono  (say 
they)  should  that  be  done?  is  it  for  the  benefit  of  tlie  obligor? 

Besp.  Certainly  it  may  be  necessary  on  that  account  for 
these  reasons: — 

First.  A  bond  is  a  more  favourable  contract  for  him  than  a 
promise;  for  the  penalty  is  a  re-purch£ise  of  his  trade  ascer- 
tained before  hand,^  and  on  payment  thereof  he  shall  have  it 
again;  he  may  rather  choose  to  be  bound  not  to  do  it  under  a 
penalty,  than  not  to  do  it  at  all. 

Secondly.    However  it  be,  it  is  his  own  act. 

Thirdly.  He  can  suffer  only  by  his  knavery,  and  surely 
courts  of  justice  are  not  concerned  lest  a  man  should  pay  too 
dear  for  being  a  knave. 

F&urthly.  Restraints  by  custom  may  (as  I  have  proved)  be 
inforced  with  penalties  which  are  imposed  without  the  party's 
consent,  nay  by  the  injured  party  without  the  concurrence  of 
the  other;  and  if  so,  then  a  fortiori  he  may  bind  himself  by 
a  penalty. 

Objection.  It  may  perhaps  be  objected,  that  a  false  recital 
of  a  consideration  in  the  condition  may  subject  a  man  to  an 
inconvenience,  which  the  law  so  much  labours  to  prevent. 

Besp.  But  this  is  no  more  to  be  presumed  than  false  testi- 
mony, and  in  such  a  case,  I  should  think  the  defendant  might 
aver  against  it;  for  though  the  rule  be,  that  a  man  is  estopped 
from  averring  against  anything  in  his  own  deed,  yet  that  is, 
supposing  it  to  be  his  deed ;  for  where  it  is  void,  it  is  otherwise, 
as  in  the  case  of  an  usurious  contract. 

The  application  of  this  to  the  case  at  bar  is  very  plain :  here 
the  particular  circumstances  and  consideration  are  set  forth, 
upon  which  the  Court  is  to  judge,  whether  it  be  a  reasonable 
and  useful  contract. 

7 — Sed  vide   Hardy  v.   Martin,   1 
Bro.  Cha.  Bep.  419,  note.     (Rep.) 


12      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

The  plaintiff  took  a  baker's  house,  and  the  question  is, 
whether  he  or  the  defendant  shall  have  the  trade  of  this  neigh- 
borhood; the  concern  of  the  public  is  equal  on  both  sides. 

What  makes  this  the  more  reasonable  is,  that  the  restraint  is 
exactly  proportioned  to  the  consideration  (viz.)  the  term  of 
five  years. 

To  conclude :  In  all  restraints  of  trade,  where  nothing  more 
appears,  the  law  presumes  them  bad;  but  if  the  circumstances 
are  set  forth,  that  presumption  is  excluded,  and  the  Court  is  to 
judge  of  those  circumstance,  and  determine  accordingly;  and 
if  upon  them  it  appears  to  be  a  just  and  honest  contract,  it 
ought  to  be  maintained. 

For  these  reasons  we  are  of  opinion,  that  the  plaintiff  ought 
to  have  judgment.^ 

.j^  HITCHCOCK  v.  COKER 

(King's  Bench  and  Exchequer  Chamber,  1837.     6  Adolphus  & 

EUis,  438.) 

Assumpsit.  The  declaration  stated  that,  before  and  at  the 
time  of  making  the  agreement  and  the  promise  of  defendant 
thereinafter  mentioned,  the  plaintiff  was  a  druggist,  and  had 
taken  defendant  into  his  service  as  an  assistant  in  his  said  trade, 
at  a  certain  annual  salary,  upon  condition  (amongst  other  things) 
that  defendant  should  enter  into  and  observe  and  perform  the 
agreement  thereinafter  contained:  that,  in  consideration  of  the 
premises,  and  in  performance  of  the  said  condition,  to  wit,  on 
12th  of  April,  1832,  by  a  certain  agreement  then  made  by  and 
between  defendant  of  the  one  part  and  plaintiff  of  the  other 
(after  reciting  that  plaintiff  had  taken  defendant  into  his  serv- 
ice as  an  assistant  at  a  certain  annual  salary,  upon  condition, 

8 — So  Chesman  v.  Nainby,  2  Stra.  the  city  where  the  partnership  busi- 

739,  and  3  Bro.  Pari.  Ca.  349,  S.  C.  ness    was    carried    on)  ;    Oilman    v. 

(Eep.)  Dwight,  13  Gray,  356  (sale  by  phy- 

See  Hursen  v.  Gavin,  162  111.  377  sieian   of   his   practice   in   a   village 

(sale  of  livery  business  by  one  part-  with  covenant  that  no  other  person 

ner  to   the  other  with  contract  not  would  in  four  years  establish  himself 

to  engage  in  the  same  business   in  as  a  physician  in  that  village). 


THE  COMMON  LAW  13 

amongst  other  things,  that  defendant  should  enter  into  and 
observe  and  perform  the  agreement  tliereinafter  contained)  the 
defendant  did,  in  and  by  the  said  agi-eeraent,  promise  and  agree 
to  and  with  the  plaintiff  that,  if  defendant  should  at  any  time 
thereafter,  directly  or  indirectly,  either  in  his  own  name  or  in 
the  name  of  any  other  person,  use,  exercise,  carry  on,  or  follow 
the  trades  or  businesses  of  a  chemist  and  druggist,  or  either  of 
them,  within  the  town  of  Taunton,  in  the  county  of  Somerset, 
or  within  three  miles  thereof,  then  defendant,  his  executors,  etc., 
should  or  would,  on  demand,  pay  plaintiff,  his  executors,  etc., 
£500,  as  and  for  liquidated  damages;  and  the  said  agreement 
being  so  made  as  aforesaid  afterwards,  to  wit  on  etc.  (mutual 
promises  to  perforin  the  agreement)  :  and,  although  etc.  (alle- 
gation of  performance  by  plaintiff),  yet  defendant  hath  not 
performed  the  said  agreement  on  his  part,  but,  on  the  contrary, 
afterwards,  and  after  the  making  the  said  agreement,  to  wit 
21st  of  April,  1832,  defendant  in  his  own  name  used  and  exer- 
cised, carried  on  and  followed,  the  trades  and  businesses  of  a 
chemist  and  druggist  within  the  said  town  of  T.,  in  the  said 
county  of  S.,  contrary  to  the  said  agreement:  and,  although 
plaintiff  afterwards,  to  wit  20th  January,  1835,  demanded  of 
defendant  the  said  £500,  yet  defendant,  not  regarding  etc.,  hath 
not  as  yet  paid  etc.    Plea,  non  assumpsit. 

On  the  trial,  before  Gurney,  B.,  at  the  Somersetshire  Spring 
assizes,  1835,  the  jury,  by  agreement  of  the  parties,  found  a 
verdict  for  the  plaintiff,  assessing  the  actual  damages  at  £500, 
whether  the  £500  in  the  agreement  mentioned  was  to  be  con- 
sidered as  liquidated  damages  or  a  penal  sum.  In  Easter  term, 
1835,  Erie  obtained  a  rule,  in  the  Court  of  King's  Bench,  to 
shew  cause  why  judgment  should  not  be  arrested. 

Bompas  Serjt.  and  Crowder  shewed  cause  in  Easter  term  last. 
[April  30,  1836,  before  Lord  Denman,  C.  J.,  Littledale,  Patte- 
SON,  and  Coleridge,  JJ.]  The  agreement  recites  that  the  plain- 
tiff had  taken  the  defendant  in  consideration  of  his  performing 
the  agreement;  and  then  there  are  mutual  promises  to  perform, 
which  are  the  consideration  for  each  other.  The  promise  alleged 
in  the  declaration  to  be  broken  is,  therefore,  on  the  whole,  upon 
an  executory  consideration.  It  is  not  as  if  the  defendant  had 
promised  in  consideration  of  the  plaintiff  having  taken  him. 
The  general  question  is,  whether  the  restraint  of  trade  here  be 


14      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

larger  than  the  law  will  sanction.  Some  cases  are  collected  in 
Com.  Dig.  Trade  (D  3.),  and  in  note  (1)  to  Hunlocke  v.  Black- 
lowe  [2  Wms.  Saund.  156].  The  leading  case  is  Mitchel  v. 
Reynolds,  [1  P.  Wms.  181.  See  notes  on  S.  C.  in  1  Smith's 
Leading  Cases,  p.  181].  There  a  bond  not  to  carry  on  the  trade 
of  a  baker  within  a  parish  was  held  good;  and  Parker,  C.  J., 
said  that,  whether  by  promises  or  bond,  a  general  restraint  was 
bad,  but  a  restraint  as  to  a  particular  place  good,  if  there  ap- 
peared a  sufficient  consideration.  Many  parishes  are  larger 
than  the  space  to  which  the  present  contract  extends.  In  Wick- 
ens  V.  Evans  [3  Y.  &  J.  318],  parties  mutually  agreed  to 
abstain  from  interfering  with  each  other  in  large  districts  of 
England,  and  it  was  held  good.  In  Homer  v.  Graves  [7  Bing. 
735],  an  agreement  not  to  practise  as  a  dentist  within  100  miles 
of  York,  without  the  plaintiff's  consent,  while  the  plaintiff  should 
be  practising  as  a  dentist,  was  held  bad,  on  the  ground  that  the 
restraint  was  larger  than  was  needed  for  the  plaintiff's  protec- 
tion. [Coleridge,  J.  Here  the  agreement  restrains  the  defend- 
ant, though  the  plaintiff  should  leave  the  place,  or  quit  practice, 
or  die.]  The  agreement  would  probably  be  construed  as  a  per- 
sonal contract,  expiring  witli  the  lives  of  the  parties.  Besides, 
the  plaintiff  might  choose  to  bargain  for  a  restraint  enabling 
him  to  sell  his  practice,  or  to  bequeath  it.  Many  of  the  agree- 
ments which  have  been  held  good  were  in  this  form.  In  Davis 
V.  Mason  [5  T.  R.  118],  a  bond  conditioned  that  the  defendant, 
who  had  been  taken  as  assistant  to  the  plaintiff,  a  surgeon  and 
apothecary,  should  not  practise  wathin  ten  miles  of  Thetford, 
was  held  good.  There  the  consideration  was  like  that  in  the 
present  case,  even  if  it  be  held  executed.  In  that  ease  there  was 
no  limitation  of  the  contract  to  the  duration  of  the  plaintiff's 
practice  or  life :  and  there  was  none  such  in  Chesman  v.  Nainby 
[2  Str.  739.  S.  C.  2  Ld.  Raym.  1456.  S.  C.  in  Error,  in  Dom. 
Proc.  1  Bro.  P.  C.  234.  (2d  ed.)],  or  in  Haywood  v.  Young 
[2  Chitt.  407],  where  the  restraint  extended  over  twenty  miles. 
In  Yoang  v.  Timmins  [1  C.  &  J.  331.  S.  C.  1  Tyrwh.  226],  the 
restraint  was  held  to  be  bad,  as  being  without  adequate  con- 
sideration, the  one  party  being  restrained  from  working  with- 
out the  consent  of  the  other,  who  was  not  bound  to  find  work, 
and  was  expressly  allowed  to  employ  others,  and  rescind  the 
arrveement  at  three  months'  notice.    When  it  is  said  that  there 


THE  COMMON  LAW  15 

must  be  adequate  consideration,  it  is  not  meant  that  the  Court 
will  inquire  whether  the  party  submitting  to  the  restraint 
made  a  judicious  contract.  There  must  be  a  legal  consideration 
to  support  the  promise;  and  the  cases  decide  that  the  taking 
into  service  is  such.  In  Mitchel  v.  Reynolds,  [1  P.  W.  190,  191, 
192],  one  test  put  is  the  advantage  to  the  party  who  imposes 
the  restraint.  In  Homer  v.  Ashford  [3  Bing.  322],  it  was  held 
sufficient,  on  general  demurrer,  that  the  declaration  stated  the 
covenant  to  be  "for  the  considerations  therein  mentioned." 
This  shews  that  the  magnitude  of  the  consideration  moving  the 
party  promising  is  not  to  be  weighed  by  the  Court,  if  there  be 
some  legal  consideration. 

Erie  and  Kinglake  contra.  No  consideration  appears  for  the 
agreement  itself,  except  that  the  plaintiff  had  taken  the  de- 
fendant into  his  service :  that  is  an  executed  consideration,  and 
without  a  request.  INIutual  promises  form  a  good  consideration, 
where  the  agreement  itself  is  good;  but,  according  to  the  cases, 
an  agreement  in  restraint  of  trade  must  itself  be  upon  good 
consideration.  It  makes  no  difference  that  the  agreement  states 
the  plaintiff  to  have  taken  the  defendant  on  condition  that  the 
latter  would  perform  an  agreement  not  then  existing.  But, 
independently  of  this  objection,  there  is  no  consideration  unless 
the  plaintiff  part  with,  or  the  defendant  receive,  some  advantage. 
Here  the  plaintiff  is  bound  to  nothing,  and  the  defendant  gets 
nothing.  At  all  events  the  consideration  is  not  adequate  to  the 
restraint.  In  Mitchel  v,  Reynolds  [1  P.  W.  186],  Parker,  C. 
J.,  says,  "Where  a  contract  for  restraint  of  trade  appears  to 
be  made  upon  a  good  and  adequate  consideration,  so  as  to  make 
it  a  proper  and  useful  contract,  it  is  good."  In  Gale  v.  Reed 
[8  East,  86],  Lord  Ellenborough  says,  "The  restraint  on  one 
side  meant  to  be  enforced  should  in  reason  be  coextensive  only 
with  the  benefits  meant  to  be  enjoyed  on  the  other;"  and  he 
adds  that  the  Courts  will  so  construe  the  agreements  as  to 
make,  if  possible,  the  benefits  coextensive.  Therefore  a  mere 
technical  consideration  is  not  enough.  In  an  Anonymous  case 
in  Moore  [Moore,  115,  pi.  259),  it  was  held  that  no  action  lay 
on  a  bond,  by  an  apprentice  of  a  mercer  of  Nottingham  to  his 
master,  not  to  exercise  the  trade  in  Nottingham  for  four  years. 
In  another  Anonymous    [Moore,  242,  pi.   379,   S.   C.   2  Leon. 


16      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

210]  case  in  the  same  book,  a  bond  conditioned  not  to  exercise 
the  trade  of  a  blacksmith  in  South  Mims  was  held  bad.  No 
consideration  appeared  in  these  cases;  and  the  Court  presumed 
none,  though  the  contracts  were  under  seal.  In  Chesman  v. 
Nainby  [2  Str.  739,  S.  C.  2  Ld.  Raym.  1456.  S.  C.  in  Error,  in 
Dom.  Proc.  1  Bro.  P.  C.  234.  (2d  ed.)]  the  Court  thought 
there  was  ground  for  inferring  a  covenant  to  instruct  for  three 
years.  In  Horner  v.  Graves  [7  Bing.  735]  the  Court  adverted 
to  the  question  of  the  slenderness  of  consideration  as  a  proper 
test,  though  the  decision  was  principally  on  another  point.  Fur- 
ther, an  agreement  of  this  sort,  to  be  good,  must  not  be  oppres- 
sive; which  it  is,  if  it  impose  a  restraint  greater  than  is 
necessary  for  the  plaintiff's  protection.  [Per  Curiam,  in  Hor- 
ner V.  Graves,  7  Bing.  743.]  Here  the  time  during  which  the 
defendant  is  restrained  is  longer  than  the  plaintiff  can  require, 
inasmuch  as  it  is  not  put  an  end  to  by  the  plaintiff's  death  or 
retirement  from  business.  Suppositions  have  been  made  for 
the  plaintiff,  upon  which  it  might  possibly  be  for  his  benefit 
that  the  restraint  should  not  be  put  an  end  to  by  his  own  death 
or  ceasing  to  carry  on  the  business :  but  the  restraint  is  general, 
and  will,  if  the  agreement  be  upheld,  operate  whether  those 
suppositions  be  verified  or  not.  The  objections  hitherto  have 
been  made  principally  to  the  extent  of  space  to  which  the 
contract  extended ;  but  its  duration  is  manifestly  as  much  a 
test  of  its  reasonableness.  In  Davis  v.  Mason  [5  T.  R.  118] 
and  Homer  v.  Ashford  [3  Bing.  323]  the  duration  was  limited 
to  fourteen  years:  in  Mitchel  v.  Reynolds  [1  P.  "W.  181]  to 
five.  It  does  not  appear  whether  there  was  a  limit  in  Hayward 
V.  Young  [2  Chit.  407].  If  the  agreement  here  be  construed 
as  limited  to  the  time  during  which  the  defendant  should  re- 
main in  the  plaintiff's  service,  the  declaration  is  bad,  for  want 
of  an  allegation  that  the  defendant  was  still  in  the  service.  So 
if  it  be  construed  as  limited  to  the  life  of  the  plaintiff,  or  his 
carrying  on  trade  by  himself  or  his  executors  or  assigns,  the 
corresponding  allegations  are  wanting. 
Cur.  Adv.  vult. 

LORD  DENMAN,  C.  J.,  in  TriniUj  term  last  (May  25th), 
delivered  the  judgment  of  the  Court  of  King's  Bench.  After 
stating  the  nature  of  the  motion,  his  Lordship  said: 


THE  COMJVION  LAW  17 

Some  minor  objections  were  taken  to  the  declaration,  which 
it  is  unnecessary  to  notice,  as  we  are  of  opinion  that  the  agree- 
ment itself  is  illegal. 

The  law  upon  this  subject  has  been  settled  by  a  series  of 
decisions,  from  Mitchel  v.  Keynolds  [1  P.  W.  181]  to  Horner 
V.  Graves  [7  Bing.  735]  ;  viz.  that  an  agreement  for  a  partial 
and  reasonable  restraint  of  trade  upon  an  adequate  considera- 
tion is  binding,  but  that  an  agreement  for  general  restraint  is 
illegal.  What  shall  be  considered  as  a  reasonable  restraint  was 
much  discussed  in  the  case  of  Homer  v.  Graves  [7  Bing.  735]  ; 
where  the  Chief  Justice  of  the  Common  Pleas  observed  [P. 
743],  "We  do  not  see  how  a  better  test  can  be  applied  to  the 
question  whether  reasonable  or  not,  than  by  considering 
whether  the  restraint  is  such  only  as  to  afford  a  fair  protection 
to  the  interests  of  the  party  in  favor  of  whom  it  is  given,  and 
not  so  large  as  to  interfere  with  the  interests  of  the  public. 
Whatever  restraint  is  larger  than  the  necessary  protection  of 
the  party,  can  be  of  no  benefit  to  either,  it  can  only  be  oppres- 
sive ;  and  if  oppressive,  it  is,  in  the  eye  of  the  law,  unreason- 
able. Whatever  is  injurious  to  the  interests  of  the  public  is 
void,  on  the  grounds  of  public  policy."  It  may  indeed  be 
said  that  all  such  agreements  interfere  in  some  degi'ee  with 
the  public  interest;  and  great  difficulty  may  attend  the  appli- 
cation of  that  test,  from  the  variety  of  opinions  that  may  exist 
on  the  question  of  interference  with  the  public  interest  which 
the  law  ought  to  permit.  But,  on  the  other  hand,  it  appears 
quite  safe  to  hold  that  the  law  will  not  enforce  any  agreement 
for  curtailing  the  rights  both  of  the  public  and  the  contracting 
party,  without  its  being  necessary  for  the  protection  of  him 
in  whose  favour  it  is  made.  In  that  case,  the  question  arose 
upon  the  distance  to  which  the  restraint  extended :  here  it 
arises  upon  the  time.  The  agreement  as  to  time  is  indefinite ; 
it  is  not  limited  to  such  time  as  the  plaintiff  should  carry  on 
business  in  Taunton,  nor  to  any  given  number  jo|_years",  nor 
even  to  the  life  of  the  plaintiff:  but  it  attaches  to  the  defendant 
so  long  as  he  lives,  although  the  plaintiff  may  have  left  Taunton, 
or  parted  with  his  business,  or  be  dead.  None  of  the  cases  in 
the  books  turn  upon  this  question;  it  is  indeed  alluded  to  in 
Chesman  v.  Nainby  [2  Str.  739.  S.  C.  2  Ld.  Raym.  1456.  S.  C. 
in  Error,  in  Dom.  Proc.  1  Br.  P.  C.  234,   (2d  ed.)]  ;  and  the 

Kales  R.  of  T.  Vol.  1—2 


18      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

counsel  for  the  plaintiff  below,  arguendo,  seems  to  admit  that 
the  bond  on  which  that  action  was  brought  could  not  be  put  in 
force  for  a  breach  after  the  death  of  the  obligee :  but  the  breach 
was  assigned  on  another  part  of  the  condition,  and  held  good. 
In  the  present  case,  the  agreement,  not  being  under  seal,  and 
not  being  divisible,  if  bad  in  part,  is  bad  altogether.  In  the 
absence  of  any  authority  establishing  the  validity  of  an  agree- 
ment thus  indefinite  in  point  of  time,  and  trying  the  reason- 
ableness of  it  by  the  test  above  alluded  to,  we  think  that  the 
restraint  is  larger  than  the  necessary  protection  of  the  party 
in  favour  of  whom  it  is  given  requires,  and  that  it  is  therefore 
oppressive  and  unreasonable.  The  consideration  for  this  agree- 
ment appears  to  have  been  trifling;  but,  even  if  it  had  been 
much  more  valuable,  the  same  result  would  have  followed. 
The  judgment  must  be  arrested. 

Rule  absolute. 

Error  having  been  brought  in  the  Court  of  Exchequer 
Chamber,  the  case  was  argued  on  Saturday,  November  26,  1836, 
before  Tindal,  C.  J.,  Lord  Abinger,  C.  B.,  Gaselee  and 
Vaughan,  Js.,  BoullAnd  and  Alderson,  Bs. 

Sir  W.  W.  FoUett,  for  the  plaintiff  in  error  (the  plain- 
tiff below).  The  plaintiff  was  not  bound  to  take  the  defendant 
into  his  service:  his  doing  so,  therefore,  constitutes  a  good 
consideration :  the  defendant  has  learned  the  secrets  of  the 
business,  and  has  become  acquainted  with  the  customers.  The 
objection  as  to  the  restraint  being  larger  than  is  beneficial  to 
the  plaintiff  was  for  the  parties  themselves  to  consider:  but,  in 
fact,  it  is  not  larger.  First,  as  to  the  magnitude  of  the  con- 
sideration, there" is  here  a  full  consideration  in  fact:  but  it  is 
necessary  only  that  there  should  be  a  consideration  capable  of 
legally  supporting  an  agreement:  the  magnitude  of  its  value, 
provided  there  be  a  legal  value,  the  Court  cannot  consider. 
This  is  all  that  the  dicta  to  be  found  (for  instance)  in  Mitchel 
V.  Reynolds  [1  P.  W.  181],  Homer  v.  Graves  [7  Bing.  735], 
Davis  V.  Mason  [5  T.  R.  118],  Gale  v.  Reed  [8  East,  80],  and 
Young  V.  Timmins  [1  C.  &  J.  331.  S.  C.  1  Tyrwh.  226],  can 
mean.  [Al,derson,  B.  If  the  considerations  were  so  small  as 
to  be  colourable,  the  agreement  would  be  bad.]  That  is  the 
full  extent  to  which  the  dicta  can  be  held  properly  to  go.     The 


THE  COLOION  LAW  19 

lan^age  which  has  been  supposed  to  touch  upon  the  amount 
of  consideration  had  reference  to  the  cases  of  bonds,  where  no 
consideration  at  all  appeared,  as  in  the  case  of  the  dyer  who 
gave  a  bond  without  consideration.  [Yearb.  Pasch.  2  H.  5. 
fol.  5  B.  pi.  26.  Agreed  to  Per  Curiam,  in  the  Anonymous  Case, 
Moore,  242.  pi.  379.  S.  C.  2  Leon.  210;  and  see  in  Mitchel  v. 
Reynolds,  1  P.  W.  193.]  Li  Homer  v.  Graves  [7  Bing.  735] 
the  amount  of  consideration  was  not  the  ground  of 
decision.  Secondly,  the  extent  of  the  restraint  is  reason- 
able. In  Homer  v.  Graves  [7  Bing.  735]  the  restric- 
tion was  thought  to  extend  to  a  distance  which  could 
not  be  of  any  benefit  to  the  plaintiff.  [Lord  Abinger,  C.  B. 
I  should  have  thought  that  both  questions  were  for  the  jury.] 
It  is  difficult  to  see  how  the  questions  can  be  raised  on  the 
record.  In  Bunn  v.  Guy  [4  East,  190]  the  restriction  of  an 
attorney's  practice  extended  to  London  and  150  miles  round, 
and  yet  was  held  valid.  Here  the  objection  is  to  the  time. 
The  policy  of  the  English  law  admits  of  restraints  unlimited 
as  to  time:  for,  under  the  ancient  corporate  system,  the  carry- 
ing on  trades  within  certain  limits  by  any  but  a  privileged 
class  was  often  prohibited  without  any  such  limitation.  The 
restraint  here  does  not  extend  beyond  the  defendant's  life. 
These  restraints  commonly  originate  in  contracts  of  service,  in 
partnerships,  and  iu  sales  of  good-will.  The  restriction  may 
be  unlimited,  as  to  time,  in  any  of  these  cases.  If  the  plaintiff 
had  sold  the  good-will  to  a  stranger,  could  it  have  been  un- 
reasonable that  he  himself  should  have  been  restrained  for 
life,  without  reference  to  the  vendee's  life,  since  the  vendee 
might  afterwards  wish  to  sell  it?  Or  why  should  not  the 
plaintiff  have  the  power  of  bequeathing  it?  Good- will  has 
been  treated  as  assets  in  the  hands  of  an  executor  [See  2 
Williams  on  Executors,  1178.  note  (p),  pt.  iv.  book  1.  ch.  i. 
(2d  ed.)-]  So,  if  one  partner  quit  a  partnership  on  terms,  it 
is  reasonable  that  he  should  agree,  for  his  own  life,  not  to  be 
a  competitor  with  the  remaining  partners,  or  any  new  partners 
or  assignees.  There  is  no  authority  for  the  limitation  con- 
tended for,  except  the  argument  of  counsel  in  Chesman  v. 
Nainby  [2  Str.  743,  744],  and  the  apparent  concession  of  the 
opposite  counsel,  the  point  not  being  raised  in  the  cause.  If 
it  be  necessary  to  confine  the  restraint  to  the  plaintiff's  life. 


20      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

then  a  restraint  for  fourteen  years  only,  without  reference  to 
the  life,  would  be  bad :  but  it  was  held  good  in  Davis  v.  Mason 
[5  T.  R.  118]  and  Homer  v.  Ashford  [3  Bing.  323].  In  Mitchel 
V.  Reynolds  [1  P.  W.  181],  no  such  limitation  is  laid  down  in 
the  judgment ;  and  there  the  contract  was  for  five  years  generally, 
without  reference  to  the  life  of  any  party.  In  Bunn  v.  Guy 
[4  East,  190]  and  Hayward  v.  Young  [2  Chitt.  407]  there  was 
no  limitation  as  to  time.  In  Bryson  v.  Whitehead  [1  Sim.  & 
Stu.  74]  Sir  John  Leach,  Vice-Chancellor,  enforced  an  agree- 
ment by  a  trader,  upon  selling  a  secret  in  his  trade,  to  restrain 
himself  for  twenty  years  absolutely  from  the  use  of  such  secret, 
and  said  that  he  might  "restrain  himself  generally."  The 
limitation  as  to  time  might  have  been  insisted  on  in  Capes  v. 
Hutton  [2  Russ.  357],  but  was  not.  The  reporter's  note  on 
"Williams  v.  Williams  [2  Swanst.  254]  collects  the  cases  as  to 
contracts  in  restraint  of  trade,  but  does  not  mention  the  ques- 
tion of  duration.  If  the  want  of  limitation  to  the  life  of  the 
plaintiff  render  the  defendant  liable  to  the  plaintiff's  executors, 
that  must  be  on  the  ground  that  the  restraint  becomes  part  of 
the  plaintiff's  personal  estate:  if  so,  the  contract  is  not  longer 
than  is  beneficial  to  the  plaintiff.  Further,  the  contract  is  for 
the  defendant  to  pay  £500  if  he  practise.  The  plaintiff  might, 
if  he  pleased,  have  demanded  the  sum  absolutely  for  taking 
the  defendant  into  his  service  at  all:  why  then  may  he  not 
make  the  payment  depend  upon  the  defendant's  abstaining 
from  practice?  On  a  contract,  shaped  as  this  is,  perhaps  a 
court  oi  equity  would  not  restrain  a  party  from  practising,  but 
would  treat  the  agreement  as  simply  a  condition  attached  to 
the  payment  of  the  money. 

Erie,  for  the  defendant  in  error  (the  defendant  below). 
First,  contracts  in  restraint  of  trade  are  void  prima  facie:  but, 
where  the  consideration  is  adequate,  it  is  an  excepted  case,  and 
they  are  then  allowed;  Mitchel  v.  Reynolds  [1  P.  W.  181]. 
Here  there  is  not  such  a  consideration.  The  service  is  paid  for 
by  the  salary,  which  must  be  presumed  to  be  no  more  than 
adequate  to  the  service,  and  which  cannot  form  a  consideration 
for  the  restraint.  The  agreement  is  made  after  the  relation  of 
master  and  servant  is  entered  into:  the  consideration  is  there- 
fore executed;  and  there  is  no  request.    But,  supposing  a  legal 


THE  COMMON  LAW  21 

consideration  to  exist,  there  is  no  adequate  one;  this  has  been 
always  required  to  take  the  case  out  of  the  rule  invalidating 
such   contracts;   and   the   Courts  will  notice   tlie   adequacy   or 
inadequacy.     The  expressions  of  the  Judges  can  be  no  other- 
wise construed.      [Alderson,  B.,  referred  to  the  language  of 
Lord  Kenyon,  in  Davis  v.  Mason   [5  T.  R.  120.]     There  the 
introduction  is  put  as  a  "fair"  consideration.     In  Mitchel  v. 
Reynolds  [1  P.  W.  186]  the  words  of  the  Court  are,  "upon  a 
good  and  adequate  consideration,  so  as  to  make  it  a  proper  and 
useful  contract."     [Lord  Abinger,  C.  B.     Do  you  say  a  bond 
would  be  bad,  if  it  were  conditioned  for  any  abstinence  from 
trade  and  no  consideration  appeared?]     The  Court,  in  Mitchel 
V.  Reynolds  [1  P.  W.  192],  say,  in  answer  to  such  a  question, 
"Wherever   such   contract    stat   indiffer enter,   and   for   aught 
appears,  may  be  either  good  or  bad,  the  law  presumes  it  prima 
fade  to  be  bad."     In  the  two  Anonymous  cases  [Moore,  115. 
pi.  259,  Moore,  242.  pi.  379,  S.  C.  2  Leon,  210]  in  Moore,  bonds 
were  held  void :  yet,  in  the  technical  sense,  a  bond  is  presumed 
to  be  upon  consideration.     In   Jelliet  v.   Broad    [Noy,   98]    a 
promise,  for  a  good  consideration,  not  to  trade  in  a  particular 
place,  was  upheld;  but  Leggate  v.  Batchelour   [Noy,  98]   was 
there  cited  and  approved  of,  in  which  a  bond  on  a  condition 
not  to  trade  in  Canterbury  or  Rochester  for  four  years,  no  con- 
sideration appearing,  was  held  bad.      [Alderson,  B.     In  Jel- 
liet v.  Broad  [Noy,  98]  the  consideration  was  the  sale  of  goods 
for  £200:  it  might  be  argued  that  the  goods  were  to  be  pre- 
sumed worth  the  money.]     Prugnell  v.  Gosse  [Aleyn.  67]  seems 
to  shew  that  the  adequacy  of  the  consideration  must  be  dis- 
cussed.    In  Young  v.  Timmins  [1  C.  &  J.  331.  S.  C.  1  Tyrwh. 
226]  the  judgment  turned  entirely  on  the  question  of  adequacy 
of  consideration:  there  was  a  clear  technical  consideration,  yet 
the  contract  was  held  bad.      [Alderson,  B.     One  party  had 
the  power  to  determine  the  contract,  so  that  he  gave  up  noth- 
ing: here  there  is  an  annual  salary,  which  implies  at  least  a 
contract  for  a  year.]      It  does  not  appear  that  the  plaintiff 
could  not  discharge  the  defendant;  nor  that  the  defendant  was 
still  in  the  plaintiff's  service  when  he  signed  the  agreement. 
In   Gale   v.   Reed    [8   East,   80]    Lord   Ellenborough   enquires, 
whether  the   consideration   be   "adequate,"   whether   "the   re- 
straint on  one  side"  be  "co-extensive  only  with  the  benefits 


22      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

meant  to  be  enjoyed  on  the  other,"  whether  "the  compensation 
and  restraint"  be  "commensurate  with  each  other."  So  in 
Chesman  v.  Nainby  [2  Str.  739.  S.  C.  2  Ld.  Raym.  1456.  S.  C. 
in  Error,  in  Dom.  Proc.  1  Br.  P.  C.  234  (2d  ed.)]  the  question 
is  discussed  on  the  commensurability  of  the  consideration  with 
the  restraint.  The  same  criterion  was  recognised  in  Horner  v. 
Graves  [7  Bing.  735].  Assuming,  then,  that  principle,  it  cannot 
be  said  that  the  being  taken  into  service  at  an  annual  salary,  at 
a  time  past,  is  a  consideration  adequate  to  a  promise  by  a  party 
to  abstain  during  his  whole  life  from  exercising  the  business  in 
the  prescribed  limits.  Secondly,  the  restraint  is  more  than  is 
necessary  for  the  plaintiif's  protection.  It  is  said  that  the 
plaintiff  may  wish  to  sell  or  bequeath ;  but  nothing  of  that  kind 
appears:  and,  on  that  supposition,  the  contract  should  still  have 
been  limited  to  such  time  as  the  plaintiff,  or  his  executors,  ad- 
ministrators, or  assigns,  should  carry  on  the  business. 

Sir  W.  W.  Follett,  in  reply.  There  are  many  expressions 
which  at  first  sight  appear  to  warrant  the  argument  that  the 
Court  will  measure  the  adequacy  of  the  consideration  to  the 
restraint ;  but  no  deci^on  has  turned  upon  the  degree.  In 
Prugnell  v.  Gosse  [Aleyn,  67]  the  words  are,  "no  considera- 
tion," and  "a  consideration."  Paekeb,  C.  J.,  clearly  speaks 
only  of  technical  adequacy  in  Mitchel  v.  Reynolds  [1  P.  W. 
185,  186]  ;  yet  he  uses  the  word  "adequate,"  which  is  the 
expression  of  the  Judges,  in  Young  v.  Timmins  [1  C.  &  J.  331. 
S.  C.  1  Tyrwh.  226],  insisted  on  here  for  the  defendant.  In 
Wickens  v.  Evans  [3  Y.  &  J.  318]  Hullock,  B.,  uses  the  words, 
"sufficient  consideration,"  but  afterwards  "no  consideration," 
which  shews  that  the  technical  sufficiency  was  meant.  The 
expression  of  the  Court  in  Homer  v.  Graves  [7  Bing.  735]  is 
"good  and  sufficient."  It  is  said  that  the  plaintiff  might  dis- 
charge the  defendant:  but  in  Davis  v.  Mason  [5  T.  R.  118] 
such  a  discharge  was  admitted  on  the  record.  As  to  the  tech- 
nical objections  to  tlie  consideration,  the  original  agreement,  at 
the  commencement  of  the  service,  clearly  is  that  the  plaintiff 
shall  take  the  defendant  into  service,  and  that  the  defendant 
shall  promise:  the  agreement  is  afterwards  reduced  into  writ- 


THE  C0]\OI0N  LAW  23 

ing.     [Lord  Abinger,  C.  B.     Suppose  the  plaintiff  to  die  with- 
out assigning  the  business:  who  is  to  sue?]     The  executors,  if 
any  action  would  lie. 
Cur.  adv.  vult. 

TINDAL,  C.  J.,  on  this  day  delivered  the  judgment  of  Court. 

The  ground  upon  which  the  Court  of  King's  Bench  held, 
after  a  verdict  obtained  by  the  plaintiff  in  this  case,  that  the 
judgment  of  that  Court  ought  to  be  arrested,  was,  that  the 
agreement  set  out  upon  the  record,  and  upon  which  the  action 
was  brought,  was  void  in  law,  being  an  agreement  in  unreason- 
able restraint  of  trade.  For,  although  the  inadequacy  of  the 
consideration,  upon  which  the  agreement  was  entered  into,  was 
urged  in  argument  as  one  reason  for  holding  the  agreement  to 
be  void, — and,  in  the  delivering  the  opinion  of  the  Court,  some 
reference  was  made  to  that  objection, — yet  it  is  manifest  that 
it  formed  no  part  of  the  ground  upon  which  the  Court  refused 
to  give  their  judgment  in  favour  of  the  plaintiff. 

The  consideration  for  the  agreement  in  question  appears  to 
have  been,  the  receiving  of  the  defendant  into  the  service  of 
the  plaintiff  as  an  assistant  in  his  trade  or  business  of  a  chemist 
and  druggist,  at  a  certain  annual  salary.  And  the  agreement, 
on  the  part  of  the  defendant,  founded  upon  such  consideration, 
is  that,  if  he  should  at  any  time  thereafter,  directly  or  in- 
directly, in  his  own  name  or  that  of  any  other  person,  exercise 
the  trade  or  business  of  a  chemist  and  druggist  within  the  town 
of  Taunton,  in  the  County  of  Somerset,  or  within  three  miles 
thereof,  then  that  the  defendant  should,  on  demand,  pay  to 
the  plaintiff,  his  executors,  administrators  or  assigns,  the  full 
sum  of  £500  as  and  for  liquidated  damages. 

The  ground  upon  which  the  Court  below  has  held  this  re- 
straint of  the  defendant  to  be  unreasonable  is  that  it  operates 
more  largely  than  the  benefit  or  protection  of  the  plaintiff  can 
possibly  require ;  that  it  is  indefinite  in  point  of  time,  being 
neither  limited  to  the  plaintiff's  continuing  to  carry  on  his 
business  at  Taunton,  nor  even  to  the  term  of  his  life.  We 
agree  in  the  general  principle  adopted  by  the  Court,  that,  where 
the  restraint  of  a  party  from  carrying  on  a  trade  is  larger  and 
wider  than  the  protection  of  the  party  with  whom  the  contract 
is  made  can  possibly  require,  such  restraint  must  be  co^nsidered 


24      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

as  unreasonable  in  law,  and  the  contract  which  would  enforce 
it  must  be  therefore  void.  But  the  difficulty  we  feel  is  in  the 
application  of  that  principle  to  the  case  before  us.  Where  the 
question  turns  upon  the  reasonableness  or  unreasonableness  of 
the  restriction  of  the  party  from  carrying  on  trade  or  business 
within  a  certain  space  or  district,  the  answer  may  depend  upon 
various  circumstances  that  may  be  brought  to  bear  upon  it, 
such  as  the  nature  of  the  trade  or  profession,  the  populousness 
of  the  neighborhood,  the  mode  in  which  the  trade  or  profession 
is  usually  carried  on;  with  the  knowledge  of  which,  and  other 
circumstances,  a  judgment  may  be  formed  whether  the  restric- 
tion is  wider  than  the  protection  of  the  party  can  reasonably 
require.  But  with  respect  to  the  duration  of  the  restriction  the 
case  is  different.  The  good-will  of  a  trade  is  a  subject  of  value 
and  price.  It  may  be  sold,  bequeathed,  or  become  assets  in  the 
hands  of  the  personal  representative  of  a  trader.  And,  if  the 
restriction  as  to  time  is  to  be  held  to  be  illegal,  if  extended 
beyond  the  period  of  the  party  by  himself  carrying  on  the 
trade,  the  value  of  such  good-will,  considered  in  those  various 
points  of  view,  is  altogether  destroyed.  If,  therefore,  it  is  not 
unreasonable,  as  undoubtedly  it  is  not,  to  prevent  a  servant 
from  entering  into  the  same  trade  in  the  same  town  in  which 
his  master  lives,  so  long  as  the  master  carries  on  the  trade 
there,  we  cannot  think  it  unreasonable  that  the  restraint  should 
be  carried  further,  and  should  be  allowed  to  continue,  if  the 
master  sells  the  trade,  or  bequeaths  it,  or  it  becomes  the  property 
of  his  personal  representative;  that  is,  if  it  is  reasonable  that 
the  master  should  by  an  agreement  secure  himself  from  a 
diminution  of  the  annual  profits  of  his  trade,  it  does  not  appear 
to  us  unreasonable  that  the  restriction  should  go  so  far  as  to 
secure  to  the  master  the  enjoyment  of  the  price  or  value  for 
which  the  trade  would  sell,  or  secure  the  enjoyment  of  the  same 
trade  to  his  purchaser,  or  legatee,  or  executor.  And  the  only 
effectual  mode  of  doing  this  appears  to  be,  by  making  the  restric- 
tion of  the  servant's  setting  up  or  entering  into  the  trade  or 
business  within  the  given  limit  co-extensive  with  the  servant's 
life. 

And,  accordingly,  in  many  of  the  cases  which  have  been 
cited,  the  restriction  has  been  held  good,  although  it  continued 
for  the  life  of  the  party  restrained.     And,  on  the  other  hand. 


THE  COMJVION  LAW  25 

no  case  has  been  referred  to,  where  the  contrary  doctrine  has 
been  laid  down.  In  Bunn  v.  Guy  [4  East,  190]  a  covenant  by 
an  attorney,  who  had  sold  his  business  to  two  others,  that  he 
would  not,  after  a  certain  day,  practice  within  certain  limits, 
as  an  attorney,  was  held  good  in  law,  though  the  restriction 
was  indefinite  as  to  time.  In  Chesman  v.  Nainby  [In  Dom. 
Proc.  1  Br.  P.  C.  234.  (2d  ed.),  S.  C,  in  K.  B.  2  Str.  739.  2 
Ld.  Raym.  1456]  (in  error)  the  condition  of  the  bond  was  that 
Elizabeth  Vickers  should  not,  after  she  left  the  service  of  the 
obligee,  set  up  business  in  any  shop  within  half  a  mile  of  the 
dwelling-house  of  the  obligee,  or  of  any  other  house  that  she, 
her  executors  or  administrato-rs,  should  think  proper  to  remove 
to,  in  order  to  carry  on  the  trade ;  and  in  that  case  the  contract 
was  held  to  be  valid,  though  the  restriction  was  obviously  in- 
definite in  point  of  time,  and  although  one  of  the  grounds  on 
which  the  validity  of  the  contract  was  sought  to  be  impeached 
was,  that  the  restriction  was  for  the  life  of  the  obligor.  Again, 
in  Wickens  v.  Evans  [3  Y.  &  J.  318]  the  agreement  in  restraint 
of  trade  was  made  to  continue  during  the  lives  of  the  contract- 
ing parties;  and  no  objection  was  taken  on  that  ground. 

We  cannot,  therefore,  hold  the  agreement  in  this  case  to  be 
void,  merely  on  the  ground  of  the  restriction  being  indefinite 
as  to  duration,  the  same  being  in  other  respects  a  reasonable 
restriction. 

But  it  was  urged,  in  the  course  of  the  argument,  that  there 
is  an  inadequacy  of  consideration,  in  this  case,  with  respect  to 
the  defendant;  and  that,  upon  that  ground,  the  judgment  must 
be  arrested.  Undoubtedly  in  most,  if  not  all,  the  decided  cases, 
the  judges  in  delivering  their  opinion  that  the  agreement  in 
the  particular  instance  before  them  was  a  valid  agreement, 
and  the  restriction  reasonable,  have  used  the  expression,  that 
such  agreement  appeared  to  have  been  made  on  an  adequate 
consideration,  and  seem  to  have  thought  that  an  adequacy  of  con- 
sideration was  essential  to  support  a  contract  in  restraint  of 
trade.  If  by  that  expression  it  is  intended,  only,  that  there 
must  be  a  good  and  valuable  consideration,  such  consideration 
as  is  essential  to  support  any  contract  not  under  seal,  we  concur 
in  that  opinion.  If  there  is  no  consideration,  or  a  consideration 
of  no  real  value,  the  contract  in  restraint  of  trade,  which  in 
itself  is  never  favoured  in  law,  must  either  be  a  fraud  upon  the 


26      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

rights  of  the  party  restrained,  or  a  mere  voluntary  contract,  a 
nudum  pactum,  and  therefore  void.  But,  if  by  adequacy  of 
consideration  more  is  intended,  and  that  the  Court  must  weigh 
whether  the  consideration  is  equal  in  value  to  that  which  the 
party  gives  up  or  loses  by  the  restraint  under  which  he  has 
placed  himself,  we  feel  ourselves  bound  to  differ  from  that 
doctrine.  A  duty  would  thereby  be  imposed  upon  the  Court, 
in  every  particular  case,  which  it  has  no  means  whatever  to 
execute.  It  is  impossible  for  the  Court,  looking  at  the  record, 
to  say  whether,  in  any  particular  case,  the  party  restrained  has 
made  an  improvident  bargain  or  not.  The  receiving  ifistnic- 
tion  in  a  particular  trade  might  be  of  much  greater  value  to 
a  man  in  one  condition  of  life  than  in  another;  and  the  same 
may  be  observed  as  to  other  considerations.  It  is  enough,  as 
it  appears  to  us,  that  there  actually  is  a  consideration  for  the 
bargain;  and  that  such  consideration  is  a  legal  consideration, 
and  of  some  value.  Such  appears  to  be  the  case  in  the  present 
instance,  where  the  defendant  is  retained  and  employed  at  an 
annual  salary.  We  therefore  think,  notwithstanding  the  ob- 
jections which  have  been  urged  on  the  part  of  the  defendant, 
that  the  plaintiff  has  shewn  upon  the  record  a  legal  ground  of 
action;  and,  having  obtained  a  verdict  in  his  favour,  that  he  is 
entitled  to  judgment. 

Judgment  for  the  plaintiff. 

^^^^  -^    

^        A.    <^^U^  FRENCH  v.   PARKER 

■^  ,   ,^>^(  Supreme  Court  of  Rhode  Island,  1888.     16  R.  I.  219.) 

Bill  for  injunction.     On  demurrer. 

BiU  by  Charles  H.  French  against  Edward  D.  L.  Parker  to 
enjoin  him  from  practicing  medicine  in  violation  of  an  agree- 
ment.   Defendant  demurred. 

William  H.  Clapp,  for  complainant.  James  M.  Bipley  and 
Nathan  W.  Littlefield,  for  respondent, 

DURFEE,  C.  J.  The  case  stated  in  the  bill  is  to  the  effect 
that  in  February,  A.  D.  1887,  the  defendant,  who  was  then  a 
physician  and  surgeon  living  and  practicing  his  profession  in 


\ 


THE  COMMON  LAW  27 

the  city  of  Pawtueket,  published  an  advertisement  offering  to 
relinquish  a  very  lucrative  practice  to  the  "right  man,  pur- 
chasing his  real  estate  at  its  actual  value;"  that  the  complain- 
ant, likewise  a  physician  and  surgeon,  was  then  living  and 
practicing  his  profession  in  Waterbury,  Conn. ;  that  he  was  led 
by  the  advertisement  to  enter  into  negotiations  with  the  de- 
fendant, which  resulted  in  his  purchasing  the  said  practice  and 
estate,  and  his  removal  to  Pawtueket  with  his  family,  at  great 
expense,  and  there  entering  upon  the  practice  of  his  profession 
as  the  successor  of  the  defendant;  that  he  paid  the  defendant 
$15,000,  over  $5,000  of  which  was  for  the  practice,  the  assessed 
value  of  the  estate  being  less  than  $10,000,  and  not  of  so  much 
value  to  the  complainant  except  for  his  use  as  a  practicing 
physician ;  that  the  defendant  gave  the  complainant,  in  addition 
to  the  deed  conveying  the  estate,  a  written  covenant  by  which, 
in  considerati(Hi  of  one  dollar  and  other  valuable  considerations, 
the  defendant  assigned  his  practice  to  the  complainant,  and 
agreed  to  introduce  and  recommend  the  complainant  to  his 
patients,  and  also  agreed  not  to  engage,  at  any  time  thereafter, 
"in  the  practice  of  medicine  or  surgery  in  said  city  of  Paw- 
tueket." The  bill  alleges  that  the  defendant  has  opened  an 
office  in  Providence,  advertised  his  card  in  the  Pawtueket 
papers,  visited  his  old  patients,  and  is  now  practicing  medicine 
and  surgery  in  Pawtueket  daily,  to  the  great  damage  of  the 
complainant,  and  that  the  defendant  declares  that  he  intends 
to  continue  to  visit  and  prescribe  professionally  for  all  persons 
in  Pawtueket  who  may  call  for  him.  The  bill  asks  for  an 
injunction  to  restrain  the  defendant  from  practicing  in  Paw- 
tueket.    The  defendant  demurs. 

The  defendant  contends,  in  support  of  the  demurrer,  that 
the  covenant,  being  a  covenant  in  restraint  of  the  exercise  of  a 
profession,  is  void  because  it  is  without  limitation  of  time.  The 
ground  of  this  contention  is  that  such  a  contract  is  valid  only 
when  it  is  reasonable,  and  it  is  not  reasonable  if  the  restraint 
which  it  imposes  is  larger  than  is  necessary  for  the  protection 
of  the  party  in  whose  favor  it  is  implored.  This  view  is  in 
accord  with  the  language  used  by  the  judges  in  several  English 
cases,  but  no  case  is  cited  in  which  it  has  been  held  finally  that 
a  contract  in  restraint  of  trade  or  business  is  void  simply 
because  the  duration  of  the  restraint  is  not  limited.    We  know 


28      COMBINATIONS  AND  RESTRAINT  OP  TRADE 

of  no  such  case.  In  Hitchcock  v,  Coker,  1  Nev.  &  P.  796,  6 
Adol.  &  E.  438,  the  defendant  had  agreed  not  at  any  time  to 
engage  in  the  business  of  chemist  and  druggist,  or  either  of 
them,  in  the  town  of  Taunton;  and  the  Court  of  King's  Bench, 
on  the  authority  of  the  language  used  by  Tindal,  C.  J.,  in 
Horner  v.  Graves,  7  Bing.  735,  743,  decided  that  the  agree- 
ment was  void  because  it  was  unlimited  as  to  time;  but,  on 
appeal  to  the  judges  in  Exchequer  Chamber,  the  decision  was 
reversed,  Tindal,  C.  J.,  delivering  the  opinion.  In  the  course 
of  his  opinion,  he  said:  *'We  agree  in  the  general  principle 
that,  where  the  restraint  of  a  party  from  carrying  on  a  trade 
is  larger  and  wider  than  the  protection  of  the  party  with  whom 
the  contract  is  made  can  possibly  require,  such  restraint  must 
be  considered  as  unreasonable  in  law,  and  the  contract  which 
would  enforce  it  must  be  therefore  void."  But  distinguishing 
between  extent  and  duration  of  restraint,  he  held,  speaking  for 
the  Court,  that  the  contract  was  valid,  because  a  trader  has  an 
interest  in  his  trade  beyond  his  own  exercise  of  it,  namely,  the 
good-will,  which  may  be  sold,  bequeathed,  or  become  assets,  and 
which  it  is  therefore  not  unreasonable  for  him  to  have  protected 
by  a  continuance  of  the  restraint  beyond  his  own  life.  The 
defendant  contends  that  the  ground  of  this  decision  is  that 
there  is,  in  the  case  of  a  trade,  a  good-will  which  may  be 
bequeathed  or  may  pass  as  assets,  and  which  will  therefore  be 
the  more  valuable  for  a  continuance  of  the  restraint  after  the 
trader's  death;  whereas,  there  is  no  good-will  attaching  to  the 
profession  of  a  physician  or  lawyer  which  can  be  bequeathed 
or  pass  as  assets,  and  therefore  any  continuance  of  the  restraint 
after  the  death  of  the  lawyer  or  a  physician  is  unreasonable 
because  it  will  avail  nothing.  We  think  this  is  too  narrow  a 
view  of  the  decision.  One  of  the  cases  prominently  cited  in 
support  of  this  decision  was  Bunn  v.  Guy,  4  East,  190,  in 
which  the  covenant  of  an  attorney  not  to  practice  within  certain 
limits  was  held  to  be  good,  although  the  restraint  was  unlimited 
as  to  time.  Of  course,  the  Court  would  not  have  cited  the  case 
as  authority  for  the  decision  if  they  did  not  regard  it  as  falling 
within  the  principle  of  the  decision.  Moreover,  a  third  reason 
was  given  for  the  decision,  namely,  that  the  good-will  of  the 
trade  might  be  sold  during  the  life  of  the  trader,  and  would 
sell  for  more  if  protected  from  competition  during  the  life  of 


THE  COMIMON  LAW  29 

the  party  restrained  than  it  would  if  it  were  protected  only 
during  the  life  of  the  trader.     This  reason  is  as  valid  in  the  j 
case  of  a  profession  as  of  a  trade ;   for  whether,  technically 
speaking,  there  be  any  good-will  attending  a  profession  or  not,  \ 
the  professional  practice  itself  would  probably  sell  for  more  1 
with  the  restraining  contract,  if  the  restraint  were  unlimited  | 
in  duration,  than  it  would  if  the  restraint  were  for  the  life  of 
the   promisee   or   covenantee   only.      If   the   complainant   here 
wished  to  retire  from  his  practice,  and  sell  it,  he  could  probably 
sell  it  for  more  if  he  would  secure  the  purchaser  from  com- 
petition with  the  defendant  forever  than  he  could  if  he  could 
only  secure  him  from  such  competition  during  his  own  life. 
So,  if  he  wished  to  take  in  a  partner,  he  could,  for  the  same 
reason,  make  better  terms  with  him.     It  seems  to  us  that  the 
real  principle  of  decision  in  Hitchcock  v.  Coker  was  this:  that, 
if  the  contract  were  otherwise  valid,  it  would  not  be  held  to  be 
invalid  simply  because  the  restraint  might  continue  beyond  the 
life  of  the  party  for  whose  benefit  it  was  accorded,  if,  for  any 
reason,  it  might  be  beneficial  to  him  to  have  it  so  continue.     In 
Archer  v.  Marsh,  6  Adol.  &  E.  959,  which  was  decided  after, 
though  heard  before,  the  decision  of  the  Court  of  Exchequer 
Chamber  in  Hitchcock  v.   Coker,  Lord  Denman,   commenting 
on  the  reversal  of  the  judgment  of  the  Court  of  King's  Bench, 
said  that  the  judgment  was  reversed  "on  the  principle  that  the 
restraint  of  trade  in  that  case  could  not  be  really  injurious  to 
the  public,  and  that  the  parties  must  act  on  their  view  of  what 
restraint  may  be  adequate  to  the  protection  of  the  one,  and 
what  advantage  a  fair  compensation  for  the  sacrifice  made  by 
the  other."     This,  if  we  understand  it  correctly,  is  equivalent 
to  saying  that,  if  the  restraint  be  otherwise  not  unreasonable, 
the  courts  will  leave  the  parties  to  make  their  own  terms  in 
regard  to  its  duration ;  and  this  is  consonant  with  the  uniform 
course  of  decision  both  before  and  since  Hitchcock  v.  Coker. 

Thus,  the  party  restrained  in  Davis  v.  Mason,  5  Term.  R. 
118,  was  a  surgeon,  in  Hayward  v.  Young,  2  Chit.  407,  a 
surgeon  and  man-midwife,  in  Mallan  v.  May,  11  Mees.  &  W. 
652,  a  surgeon  and  apothecary,  in  Bunn  v.  Guy,  4  East,  190,  an 
attorney,  in  Butler  v.  Burleson,  16  Vt.  176,  a  physician  and  sur- 
geon, and  in  McClwg's  Appeal,  58  Pa.  St.  51,  a  physician.  In 
all  these  cases  the  contracts  were  sustained,  though  unlimited  as 


30      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

to  time,  simply  because  the  area  of  restriction  was  not  unreason- 
able. See,  also,  Gilnian  v.  Dwight,  13  Gray,  356,  Atkyns  v.  Kin- 
nier,  4  Exch.  776,  Iloyt  v.  Holly,  39  Conn.  326.  In  Butler  v. 
Burleson,  supra,  the  court  say:  "Dr.  Burleson  can  be  as  useful 
to  the  public  in  any  other  town  as  at  Berkshire,  and  the  lives  and 
health  of  persons  in  other  villages  are  as  important  as  they  are 
there." 

In  Dwight  V.  Hamilton,  113  Mass.  175,  it  was  decided  that 
a  contract  by  a  physician  for  the  sale  of  his  "practice  and 
good-will"  in  a  particular  town  is  valid,  and  carries~with  it  an^ 
implied  covenant  on  his  part  not  to  resume  practice  in  the 
town;  and  that,  if  he  attempts  to  do  so,  the  Court  will  restrain 
him  by  injunction.  In  Whittaker  v.  Howe,  3  Beav.  383,  an 
agreement  by  a  solicitor  not  to  practice  as  solicitor  in  Great 
Britain  for  twenty  years  without  the  consent  of  the  plaintiff, 
to  whom  he  had  sold  his  business  on  those  terms,  was  held  to 
be  valid,  and  an  injunction  was  granted  to  prevent  a  breach. 
There  the  restraint  was  not  unlimited,  but,,  plainly,  it  might 
have  lasted  for  years  after  the  plaintiff's  death.  The  contract 
is  necessarily  subject  to  a  natural  limitation,  since  it  must 
terminate  with  the  life  of  the  party  restrained ;  and,  abstractly, 
there  is  no  presumption  that  he  will  outlive  the  other  party. 
It  probably  seldom  happens  that  it  makes  any  real  difference 
whether  the  restraint  is  limited  to  the  life  of  the  party  who 
profits  by  it,  or  is  left  without  limitation,  since  the  physician, 
lawyer,  or  trader  who  sells  out  his  business  in  one  place,  to 
engage  in  it  elsewhere,  is  not  likely,  after  a  few  years,  if  he 
has  any  ability,  to  want  to  break  up  and  return  to  his  old 
home  and  then  start  anew.  The  tree  that  is  transplanted  and 
re  transplanted  after  coming  into  fruit  is  not  often  the  better 
for  it.  And  it  may  be  questioned  whether  the  consideration  is 
not  of  itself  reason  enough  for  allowing  the  parties  to  suit 
themselves  in  the  matter. 

In  Hastings  v.  Whitley,  2  Exch.  611,  the  defendant  had 
given  his  bond  not  to  carry  on  the  business  of  surgeon  or 
apothecary  at  a  particular  place.  In  suit  thereon  by  the  ex- 
ecutors of  the  obligee,  the  bond  was  held  to  be  good.  The  report 
states  that  one  of  the  points  for  the  defendant  was  that  the 
bond  was  illegal  and  void  if  it  should  be  construed  to  extend 
to  the  defendant's  practicing  his  profession  after  tlie  obligee's 


THE  COMMON  LAW  31 

death.  The  Court  held  that  the  obligation  was  co-extensive 
with  the  life  of  the  obligor :  and  Parke,  B.,  in  giving  judgment, 
said:  "It  was  held  in  Hitchcock  v.  Coker  that  there  was 
nothing  illegal  in  the  restriction  being  indefinite  as  to  duration, 
the  same  being  in  other  respects  reasonable."  The  comisel  for 
the  defendant  suggested,  in  the  course  of  the  hearing,  the 
distinction  which  is  here  attempted,  and  the  same  judge  re- 
plied: "What  is  the  difference?  The  good-will  of  an  apothe- 
cary is  often  disposed  of."  And  the  Court  took  no  further 
notice  of  it,  though  the  restraint  extended  to  the  business  of 
the  defendant  as  a  surgeon  as  well  as  to  his  business  as  an 
apothecary,  if  it  can  be  supposed  that  Baron  Parke  meant  to 
say  that  the  calling  of  an  apothecary  was  a  mere  trade. 

The  case,  among  the  cases  cited  for  the  defendant,  which 
comes  nearest  to  an  authority  for  him  is  Mandeville  v.  Harman, 
7  Atl.  Rep.  37.  In  that  case  the  defendant  had  covenanted 
not  to  engage  in  the  practice  of  medicine  or  surgery  in  the  city 
of  Newark  at  any  time  afterwards.  The  suit  was  by  the  cov- 
enantee, in  equity,  for  an  injunction.  The  court  refused  the 
injunction  on  the  ground  that  whether  a  restraint  so  unlimited 
as  to  time  was  reasonable  or  not  had  never  been  decided  in  that 
state.  The  Court  did  not  decide  that  such  a  restraint  was 
invalid,  though  its  intimations  were  adverse  to  it.  It  referred 
to  Keeler  v.  Taylor,  53  Pa.  St.  467,  as  holding  that  such  con- 
tracts, if  not  limited  to  a  reasonable  time,  as  well  as  confined 
to  a  reasonable  space,  were  void  at  law.  We  have  not  been  able 
to  find  any  such  doctrine  in  Keeler  v.  Taylor.  The  injunction 
was  refused  there  because  the  terms  of  the  contract  were  hard 
and  complex;  the  injunction  being,  in  the  opinion  of  the  Court, 
of  grace,  not  of  right.  In  McClurg's  Appeal,  58  Pa.  St.  51, 
which  was  in  all  points  almost  identical  with  the  case  at  bar, 
the  same  Court  which  had  previously  decided  Keeler  v.  Taylor 
granted  an  injunction,  with  very  strong  remarks  in  favor  of 
the  jurisdiction.  See  per  Sharswood,  J.,  55.  Mandeville  v. 
Harman  was  a  hard  case  for  the  defendant. 

Our  conclusion  is  that  it  is  not  a  sufficient  reason  for  refusing 
the  injunction  that  the  contract  is  unlimited  as  to  time.  In 
this  state  the  common-law  and  chancery  jurisdiction  are  vested 
in  the  same  tribunal,  and  it  is  the  practice  of  the  Court,  sitting 


32      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

in  equity,  to  decide  questions  of  law,  as  well  as  of  equity,  for 
itself,  and  to  grant  or  refuse  relief  according  as  it  decides  them. 

The  defendant  contends  that  it  is  not  a  breach  of  the  contract 
for  him  to  visit  his  old  patients  in  Pawtucket  when  summoned 
by  them  from  Providence.  We  think  it  is  clearly  a  breach,  his 
contract  being  not  to  engage  at  any  time  in  the  practice  of 
medicine  or  surgery  in  the  city  of  Pa\\i:ucket.  It  is  true  that 
the  complainant  may  not  get  the  patients  if  the  defendant  does 
not  visit  them,  but  it  was  the  chance  of  getting  them  that  would 
result  from  the  defendant's  not  practicing  in  Pawtucket  which 
the  complainant  purchased,  and  this  chance  we  think  he  is 
entitled  to  have  secured  to  him. 

Demurrer  overruled.^ 


9 — In  Mandeville  v.  Harman,  42 
N.  J.  Eq.  185,  at  p.  193,  Van  Fleet, 
V.  C,  said: 

' '  Professional  skill,  experience, 
and  reputation  are  things  which  can- 
not be  bought  or  sold.  They  con- 
stitute part  of  the  individuality  of 
the  particular  person,  and  die  with 
him.  There  can  be  no  doubt,  I  think, 
that  if  the  complainant  was  the  most 
distinguished  physician  of  the  city 
of  Newark,  and  had  by  far  the  most 
lucrative  practice  in  that  city,  and 
he  should  be  so  unfortunate  as  to 
die  next  month  or  next  year,  it  would 
be  impossible  for  his  personal  rep- 
resentative to  sell  his  good-will  or 
practice,  as  a  thing  of  property  dis- 
tinct from  the  office  which  he  had 
occupied  prior  to  his  death,  for  any 
price;  and  I  think  it  is  equally  ob- 
vious that,  if  it  were  sold  in  connec- 
tion with  his  office,  the  only  possible 
value  which  could  be  ascribed  to  it 
would  be  the  slight  possibility  that 
some  of  the  persons  who  had  been 
his  patients  might,  when  they  needed 
the  services  of  a  physician,  go  or 
send  there  for  the  next  occupant  of 
the  office.  The  practice  of  a  phy- 
sician is  a  thing  so  purely  personal, 


depending  so  absolutely  on  the  con- 
fidence reposed  in  his  personal  skill 
and  ability,  that  when  he  ceases  to 
exist  it  necessarily  ceases  also,  and 
after  his  death  can  have  neither  an 
intrinsic  nor  a  market  value.  And,  if 
the  complainant  should  make  sale  of 
his  practice  in  his  life-time,  it  ia 
manifest  all  the  purchaser  could  pos- 
sibly get  would  be  immunity  from 
competition  with  him,  and  perhaps 
his  implied  ajjproval  that  the  pur- 
chaser was  fit  to  be  his  successor; 
but  it  would  be  impossible  for  him 
to  transfer  his  professional  skill  and 
ability  to  his  successor,  or  to  induce 
anybody  to  believe  that  he  had. 

* '  These  considerations  make  it  ap- 
parent, I  think,  that  the  reason  which 
induced  the  court  of  exchequer  cham- 
ber to  hold  a  like  restraint  valid  in 
Hitchcock  V.  Coker  does  not  exist  in 
this  case.  There  a  right  or  interest 
existed,  which,  according  to  the  law 
of  Great  Britain,  would,  on  the  death 
of  its  possessor,  pass  to  his  personal 
representative.  No  such  right  or  in- 
terest exists  here.  At  least,  its 
existence  is  as  yet  unrecognized  in 
this  state  by  law." 


THE  COMMON  LAW  33 

NORDENFELT  v.  MAXIM  NORDENFELT  GUNS  & 
AMMUNITION   CO. 

(House  of  Lords,  1894.      [1894]   App.  Cas.  535.) 

LORD  HERSCHELL,  L.  C.:— ^^My  Lords,  the  question 
raised  by  this  appeal  is,  whether  a  covenant  entered  into  be- 
tween the  parties  can  be  enforced  against  the  appellant,  or 
whether  it  is  void  as  being  in  restraint  of  trade. 

The  covenant  in  question  was  contained  in  an  agreement 
of   the    12th    of   September,    1888,    and    was    in    these    terms: 

"11  The  said  Thorsten  Nordenfelt  shall  not,  during  the 
term  of  25  years  from  the  date  of  the  incorporation  of  the 
company  if  the  company  shall  so  long  continue  to  carry  on 
business,  engage  except  on  behalf  of  the  company  either  directly 
or  indirectly  in  the  trade  or  business  of  a  manufacturer  of 
guns,  gun-mountings,  or  carriages,  gunpowder,  explosives,  or 
ammunition,  or  in  any  business  competing  or  liable  to  compete 
in  any  way  with  that  for  the  time  being  carried  on  by  the 
company;  provided,  that  such  restriction  shall  not  apply  to 
explosives  other  than  gunpowder  or  to  subaqueous  or  submarine 
boats  or  torpedoes  or  castings  or  forgings  of  steel  or  iron  or 
alloys  of  iron  or  of  copper.  Provided  also  that  the  said  Thors- 
ten Nordenfelt  shall  not  be  released  from  this  restriction  by 
the  company  ceasing  to  carry  on  business  merely  for  the  pur- 
pose of  reconstitution  or  with  a  view  to  the  transfer  of  the 
business  thereof  to  another  company  so  long  as  such  other 
company  taking  a  transfer  thereof  shall  continue  to  carry  on 
the  same."  The  agreement  also  provided  that  the  appellant 
should,  for  seven  years  from  the  incorporation  of  the  re- 
spondent company,  retain  the  share  qualification  of  a  director, 
and  should  act  as  managing  director  of  the  company,  at  a 
remuneration  of  £2,000  a  year,  together  with  a  commission 
upon  the  net  profit  of  the  company. 

Before  directing  attention  to  the  particular  terms  of  the 
covenant,  and  to  the  considerations  to  which  it  gives  rise,  it  is 
necessary  to  advert  to  the  position  of  the  parties  at  the  time 
the  agreement  was  entered  into, 

10 — The    concurring    opinions    of  11 — 114  Ch.  Div.  351,  363. 

Lords  Watson,  Ashbourne,  Macnagh- 
ten  and  Morris,  are  omitted. 

Kales  R.  of  T.  Vol.  1—3 


34      COMBINATIONS  x\ND  RESTRAINT  OF  TRADE 

The  appellant  had,  prior  to  March,  1886,  o])tained  patents 
for  improvements  in  quick-firing  guns,  and  carried  on, 
amongst  other  things,  the  business  of  the  manufacture  of  such 
guns  and  of  ammunition.  In  that  month  he  procured  the 
registration  of  a  limited  liability  company,  which  was  to  take 
over  his  business,  with  the  business  assets  and  liabilities.  On 
the  5th  of  March,  1886,  an  agreement  was  made  between  the 
appellant  and  the  Nordenfelt  Guns  and  Ammunition  Company 
by  which  the  company  was  to  purchase  the  good-will  of  the 
appellant's  business,  and  all  the  stock,  plant,  and  patents  con- 
nected therewith,  he  covenanting  to  act  as  managing  director 
far  a  period  of  five  years,  and  so  long  as  the  Nordenfelt  com- 
pany should  continue  to  carry  on  business  "not  to  engage, 
except  on  behalf  of  such  company,  either  directly  or  indirectly, 
in  the  trade  or  business  of  a  manufacturer  of  guns  or  ammu- 
nition, or  in  any  business  competing  or  liable  to  compete  in 
any  way  with  that  carried  on  by  such  company." 

The  agreement  for  purchase  was  duly  carried  into  effect,  and 
the  price  paid  to  the  appellant,  namely,  £237,000  in  cash,  and 
£50,000  in  paid-up  shares  of  the  company.  In  July,  1888, 
negotiations  were  entered  into  for  the  amalgamation  of  the 
Nordenfelt  Company  and  the  Maxim  Gun  Company,  and  for 
the  transfer  of  their  business  and  assets  to  a  new  company,  to 
be  called  the  Maxim-Nordenfelt  Guns  and  Ammunition  Com- 
pany. 

By  an  agreement  for  amalgamation  of  the  two  companies, 
dated  the  3rd  of  July,  1888,  and  made  between  the  Maxim 
Company,  the  Nordenfelt  Company,  and  P.  Thaine,  on  behalf 
of  the  new  company,  the  Nordenfelt  Company  agreed  that  they 
would  procure  the  appellant  to  enter  into  the  agreement  which 
was  afterwards  embodied  in  the  instrument  of  the  12th  of 
September,   1888. 

The  respondents  were  incorporated  on  the  17th  of  July, 
1888,  and  on  the  8th  of  August  the  agreement  of  the  3rd  of 
July  was  adopted  by  the  company.  It  is  to  be  noted  that  at  the 
time  when  this  agreement  was  entered  into,  to  which  the  Nor- 
denfelt Company  was  a  party,  the  appellant  was  managing 
director  of  that  company,  and  that,  in  the  memorandum  of 
association  of  the  amalgamated  company  which  was  signed  by 
the  appellant,  the  objects  of  the  company  were  stated  to  be, 


THE  COMMON  LAW  35 

inter  alia,  not  only  the  adoption  of  the  agreement  of  the  3rd  of 
Jnly,  but  also  "to  acquire,  undertake,  and  carry  on  as  succes- 
sors to  the  Maxim  Gun  Company  and  the  Nordenfelt  Guns  and 
Ammunition  Company,  the  good-will  of  the  trade  and  busi- 
nesses heretofore  carried  on  by  such  companies  and  each  of 
them,  and  the  property  and  rights  belonging  to  or  held  in 
connection  therewith  respectively." 

This  is  of  importance,  because  the  appellant  in  a  forcible 
argument  pointed  out  that  the  judgment  of  the  Court  of 
Appeal  was  largely  founded  on  the  fact  that  the  covenant  in 
question  was  entered  into  in  connection  with  the  sale  of  the 
good- will  of  the  appellant's  business,  and  was  designed  for  the 
protection  of  the  good-will  so  sold,  and  he  contended  that  this 
was  an  error,  inasmuch  as  there  was  no  sale  by  him  of  the 
good-will  on  that  occasion,  he  having  already  parted  with  it  to 
the  Nordenfelt  Company,  the  later  sale  being  by  that  company 
and  not  by  him. 

I  think  it  is  impossible  to  accede  to  this  contention.  Upon 
the  sale  by  the  appellant  to  the  Nordenfelt  Company,  the  good- 
will was  conveyed  to  them,  and  was  protected  by  a  covenant  in 
some  respects  larger  than  the  one  he  entered  into  in  September, 
1888,  but  it  was  limited  to  the  time  during  which  that  company 
should  carry  on  business;  it  therefore  necessarily  ceased  when 
the  Nordenfelt  Company  and  the  Maxim  Company  were  ab- 
sorbed by  the  new  company.  But  in  the  agreement  for  the 
amalgamation  (to  the  making  of  which,  as  I  have  said,  the 
appellant  was  a  party)  the  covenant  which  the  Nordenfelt 
Company  undertook  to  obtain  from  the  appellant  was  to  be  in 
addition  to  the  transfer  by  the  Nordenfelt  Company  of  the  full 
benefit  of  any  obligations  which  Mr.  Nordenfelt  was  then  under 
to  that  company,  and  by  the  terms  of  the  memorandum  of 
association  of  the  new  company  the  object  was,  as  I  have 
shewn,  stated  to  the  world  to  be  the  acquisition  of  the  good- 
will of  the  Nordenfelt  Company. 

My  Lords,  in  view  of  these  facts,  I  think  the  case  must  be 
treated  on  precisely  the  same  footing  as  if  the  obligations  of 
the  covenant  under  consideration  had  been  undertaken  in  con- 
nection vnth  the  direct  transfer  to  the  respondents  of  the 
good- will  of  the  appellant's  business  and  with  the  object  of 
protecting  it. 


36      COIMBINATIONS  AND  RESTRAINT  OF  TRADE 

The  appellant  mainly  relied  upon  the  fact  that  the  covenant 
was  general,  that  is  to  say,  unlimited  in  respect  of  area,  and 
argued  that  it  was  therefore  void.  I  think  it  was  long  regarded 
as  established,  as  part  of  the  common  law  of  England,  that 
such  a  general  covenant  could  not  be  supported. 

In  early  times  all  agreements  in  restraint  of  trade,  whether 
general  or  restricted  to  a  particular  area,  would  probably  have 
been  held  bad ;  but  a  distinction  came  to  be  taken  between 
covenants  in  general  restraint  of  trade  and  those  where  the 
restraint  was  only  partial.  The  distinction  was  recognised  and 
given  effect  to  by  Lord  Macclesfield  in  his  celebrated  judg- 
ment in  Mitchel  v.  Reynolds  [1  P.  Wms.  181].  That  was  a 
case  of  particular  restraint,  and  the  covenant  was  held  good, 
the  Chief  Justice  saying,  "that  wherever  a  sufficient  considera- 
tion appears  to  make  it  a  proper  and  a  useful  contract,  and 
such  as  cannot  be  set  aside  without  injury  to  a  fair  contractor, 
it  ought  to  be  maintained;  but  with  this  constant  diveraity, 
namely,  where  the  restraint  is  general,  not  to  exercise  a  trade 
throughout  the  kingdom,  and  where  it  is  limited  to  a  particular 
place,  for  the  former  of  these  must  be  void,  being  of  no  benefit 
to  either  party,  and  only  oppressive,  as  shall  be  shewn  by-and- 
by."  And  at  a  later  part  of  the  judgment,  after  dividing 
voluntary  restraints  by  agreement  into  those  which  are,  first, 
general,  or  secondly,  particular  as  to  places  or  persons,  he 
formulates  with  regard  to  the  former  the  following  proposition : 
"General  restraints  are  all  void,  whether  by  bond,  covenant, 
or  promise,  &c.,  with  or  without  consideration,  and  whether  it 
be  of  the  party's  own  trade  or  not."  In  the  case  of  Master, 
&c.,  of  Gunmakers  v.  Fell  [Willes,  at  p.  388],  Willes,  G.  J., 
said  the  general  rule  was  "that  all  restraints  of  trade  (which 
the  law  so  much  favours^)  if  nothing  more  appear,  are  bad. 
.  .  .  But  to  this  general  rule  there  are  some  exceptions,  as, 
first,  if  the  restraint  be  only  particular  in  respect  to  the  time 
or  place,  and  there  be  a  good  consideration  given  to  the  person 
restrained. ' ' 

As  I  read  the  authorities,  until  the  cases  to  which  I  shall  call 
attention  presently,  the  distinction  between  general  and  par- 
ticular restraints  was  always  maintained,  and  the  latter  alone 
were  regarded  as  exceptions  from  the  general  rule,  that  agree- 
ments in  restraint  of  trade  were  bad. 


THE  COMLION  LAW  37 

In  the  case  of  Homer  v.  Graves  [7  Bing.  735],  Tindal,  C.  J., 
said:  "The  law  upon  this  subject  (i.  e.  restraint  of  trade)  has 
been  laid  down  with  so  much  authority  and  precision  by  Par- 
ker, C.  J.,  in  giving  the  judgment  of  the  Court  of  B.  R.  in  the 
case  of  JMitchel  v.  Reynolds  [1  P.  Wms.  181],  which  has  been 
the  leading  case  on  the  subject  from  that  time  to  the  present, 
that  little  more  remains  than  to  apply  the  principle  of  that 
case  to  the  present.  Now,  the  rule  laid  downi  by  the  Court  in 
that  case  is,  'that  voluntary  restraints,  by  agreements  between 
the  parties,  if  they  amount  to  a  general  restraint  of  trading  by 
either  party,  are  void,  whether  with  or  without  consideration; 
but  particular  restraints  of  trading,  if  made  upon  a  good  and 
adequate  consideration,  so  as  to  be  a  proper  and  useful  con- 
tract,' that  is,  'so  as  it  is  a  reasonable  restraint  only,'  are 
good. ' ' 

After  stating  that  the  case  then  before  the  Court  did  not 
"fall  within  the  first  class  of  contracts  as  it  certainly  did  not 
amount  to  a  general  restraint,"  he  proceeded  to  consider 
whether  the  particular  covenant  was  a  good  one. 

It  is  true  that  in  a  later  part  of  his  judgment  the  following 
passage  occurs:  "In  the  case  above  referred  to,  Parker,  C,  J., 
says,  'a  restraint  to  carry  on  a  trade  throughout  the  kingdom 
must  be  void;  a  restraint  to  carry  it  on  within  a  particular 
place  is  good';  which  are  rather  instances  and  examples,  than 
limits  of  the  application  of  the  rule,  which  can  only  be  at  last, 
what  is  a  reasonable  restraint  with  reference  to  the  particular 
case."  But  I  cannot,  in  view  of  the  passage  which  I  have 
quoted  from  the  earlier  part  of  his  judgment,  understand  this 
as  an  indication  of  opinion  on  the  part  of  Tind^Uj,  C.  J.,  that 
there  was  no  distinction  in  point  of  law  between  general  and 
particular  restraints;  that  in  the  case  of  both  alike  the  only 
question  is  whether  in  the  particular  case  the  restraint  is 
reasonable.  If  so,  it  could  hardly  be  said  that  the  law  had 
been  laid  down  with  precision  by  Parker,  C.  J.,  nor  could  such 
contracts  be  accurately  divided  into  two  classes,  if  every  par- 
ticular case,  whether  it  fell  within  the  one  class  or  the  other, 
was,  in  point  of  law,  to  be  dealt  with  in  precisely  the  same 
manner.  I  am  confirmed  in  this  view  of  Tindal,  C.  J.'s  opin- 
ion by  his  judgment  in  the  subsequent  case  of  Hinde  v.  Gray 
[1  Man.  &  G.  195].     In  that  case  the  defendant  had  entered 


38      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

into  a  covenant  with  the  plaintiffs,  to  whom  he  had  demised  a 
brewery  in  Sheffield,  that  he  would  not,  during  the  continuance 
of  the  demise,  carry  on  the  trade  of  brewer  or  agent  for  the 
sale  of  beer  in  Sheffield  or  elsewhere;  but  would,  so  far  as  the 
same  should  not  interfere  with  his  private  avocations,  give  all 
the  advice  and  information  in  his  power  to  the  plaintiffs  with 
regard  to  the  management  and  carrying  on  of  the  brewery. 
The  breach  alleged  was  that  the  defendant  had  solicited  and 
obtained  orders  for  ale  not  purchased  of  the  plaintiffs  nor 
brewed  by  them,  and  that  large  quantities  of  ale  had  there- 
under been  delivered  and  sold.  There  was  a  demurrer  to  this 
breach;  judgment  was  given  for  the  defendant,  Tindal.,  C.  J., 
saying  that  it  was  ' '  assigned  on  a  covenant  which,  according  to 
the  case  of  Ward  v.  Byrne  [5  M.  &  W.  548],  was  void  in  law." 
This  is,  to  my  mind,  only  intelligible  if  Ward  v.  Byrne  [5  M. 
&  W.  548],  which  was  the  case  of  a  bond  conditioned  not  to 
follow  or  be  employed  in  the  business  of  a  coal  merchant  for 
nine  months,  was  regarded  as  establishing,  as  a  matter  of  law, 
that  a  covenant  in  general  restraint,  though  limited  in  poiut 
of  time,  was  void;  unless  it  were  so,  I  do  not  see  how  it  could 
be  regarded  as  determining  that  the  covenant  in  question  in 
Hinde  v.  Gray  [1  Man.  &  G.  195]  was  void;  or,  indeed,  as  an 
authority  in  the  case  of  any  covenant  not  practically  identical 
in  all  respects.  It  is  clear  that  there  are  material  distinctions 
between  the  circumstances  of  the  two  cases;  and,  if  the  only 
question  was  whether  the  covenant  was  reasonable  in  view  of 
the  particular  circumstances,  considerations  might  weU  be 
urged  (as  indeed  they  were  by  the  learned  counsel  for  the 
plaintiffs)  why  the  case  then  before  the  Court  should  not  be 
regarded  as  governed  by  Ward  v.  Byrne  [5  M.  &  W.  548]  ;  but 
Tindal,,  C.  J.,  did  not  proceed  to  inquire  whether,  under  the 
particular  circumstances  appearing  on  the  record  in  Hinde  v. 
Gray  [1  Man.  &  G.  195],  the  covenant  was  a  reasonable  one,  or 
was  wider  than  was  requisite  for  the  protection  of  the  plain- 
tiffs, but  treated  the  case  as  concluded,  as  matter  of  law,  by 
authority. 

I  need  not  further  refer  to  Ward  v.  Byrne  [5  M.  &  W.  548], 
except  to  say,  that  although  the  learned  judges  in  that  case  did 
express  an  opinion  that  the  covenant  exceeded  what  was  neces- 
sary for  the  protection  of  the  covenantee,  they  seem  to  me  to 


THE  COMIMON  LAW  39 

recognise  that  covenants  for  a  partial  restraint,  and  these  only, 
are  exceptions  from  a  general  rule  invalidating  agreements  in 
restraint  of  trade.  In  that  case,  the  attempt  was  made,  un- 
successfully, to  maintain  that  a  covenant  otherwise  general 
might  be  regarded  as  a  particular  restraint,  if  limited  in  point 
of  time :  a  contention  for  which  some  colour  was  afforded  by  the 
language  used  in  earlier  cases. 

The  views  which  I  have  expressed  appear  to  me  to  have  been 
entertained  by  that  very  learned  lawyer  Mr.  John  William  Smith, 
as  shewn  by  his  notes  to  Mitchel  v.  Rejmolds  [1  P.  Wms.  181]. 
He  lays  down  the  law  thus:  ''In  order,  therefore,  that  a  con- 
tract in  restraint  of  trade  may  be  valid  at  law,  the  restraint 
must  be,  first,  partial,  secondly,  upon  an  adequate,  or,  as  the 
rule  now  seems  to  be,  not  on  a  mere  colourable  consideration, 
and  there  is  a  third  requisite,  namely,  that  it  should  be  reason- 
able." This  exposition  of  the  law  has,  further,  the  very  weighty 
sanction  of  Willes  and  Keating,  JJ.,  who,  after  the  death  of 
Mr.  J.  W.  Smith,  edited  the  notes  to  his  collection  of  leading 
cases. 

In  the  year  after  the  decision  of  Hinde  v.  Gray  [1  Man.  & 
G.  195]  the  case  of  Whittaker  v.  Howe  [3  Beav.  383,  394]  came 
before  Lord  Langdale.  Howe  had  covenanted  not  to  practice 
as  a  solicitor  in  any  part  of  Great  Britain  for  twenty  years, 
having  sold  his  business  to  the  plaintiff.  In  spite  of  this  he 
commenced  against  practising  in  London,  where  he  had  pre- 
viously carried  on  business.  On  an  application  for  an  inter- 
locutory injunction,  it  was  contended  that  the  covenant  was 
void.  The  Master  of  the  Rolls  refused  to  accede  to  this  conten- 
tion and  granted  the  injunction.  It  was,  of  course,  clear  that  a 
covenant  not  to  practise  in  London,  as  he  was  in  fact  doing, 
would  have  been  good,  and  it  was  natural  that  his  conduct 
should  uot  find  favour  at  the  hands  of  the  Court.  But  the 
question  was  whether  so  extensive  a  covenant  as  that  entered 
into  could  be  supported.  The  case  of  Mitchel  v.  Reynolds  [1 
P.  Wms.  181]  was  cited  in  argument,  but  neither  Ward  v. 
B>Tme  [5  M.  &  W.  548]  nor  Hinde  v.  Gray  [1  Man.  &  G.  195] 
appear  to  have  been  brought  to  the  notice  of  the  Court.  Lord 
Langdale  expressed  himself  thus  (Whittaker  v.  Howe  [3  Beav. 
383,  394])  :  "Agreeing  with  the  Court  of  Common  Fleas,  that 
in  such  cases  'no  certain  precise  boundary  can  be  laid  down 


40      COMBINATIONS  AM)  RESTRAINT  OF  TRADE 

•within  which  the  restraint  would  be  reasonable,  and  beyond 
which  excessive,'  having  regard  to  the  nature  of  the  profession 
to  the  limitation  of  time,  and  to  the  decision  that  a  distance  of 
150  miles  does  not  describe  an  unreasonable  boundary,  I  must 
say,  as  Lord  Kenyon  said  in  Davis  v.  Mason  [5  T.  R.  118],  'I 
do  not  see  that  the  limits  are  necessarily  unreasonable,  nor  do 
I  know  how  to  draw  the  line.'  " 

The  learned  judge  distinctly  indicated  that  he  had  not  ar- 
rived at  an  irrevocable  conclusion,  for  he  added:  "In  the 
progress  of  the  case  it  may  become  necessary  to  consider  fur- 
ther the  points  which  have  been  raised;  but  at  present  I  am  of 
opinion  that  the  right  claimed  by  Mr.  Howe  to  act  in  violation 
of  the  contract  for  which  he  has  received  consideration,  is,  to 
say  the  least,  so  far  doubtful,  that  he  ought  not  to  be  permitted 
to  take  the  law  into  his  own  hands."  It  is  not  necessary  to 
consider  whether  the  decision  can  be  supported,  though  it  was 
regarded  by  Willes  and  Keating,  JJ.,  as  questionable,  and  it 
is  certainly  difficult  to  see  why,  if  a  covenant  not  to  practise 
as  an  attorney  in  Great  Britain  is  good,  a  covenant  such  as  was 
in  controversy  in  Hinde  v.  Gray  [1  Man.  &  G.  195],  should  have 
been  pronounced  bad  in  point  of  law  on  demurrer.  But  I  can- 
not accept  it  as  a  weighty  authority  on  the  question  whether  it 
was  regarded  as  a  rule  of  the  common  law  that  a  general  cove- 
nant in  restraint  of  trade  was  void,  in  view  of  the  authorities  I 
have  already  referred  to. 

There  have  been  differing  expressions  of  opinion  on  the  sub- 
ject by  distinguished  equity  judges  in  more  recent  times.  I 
wiU  only  allude  to  two  of  these,  in  which  the  existence  of  the 
rule  I  have  been  considering  has  been  questioned.  In  the  case 
of  the  Leather  Cloth  Company  v.  Lorsant  [Law  Rep.  9  Eq.  345], 
James,  V.  C,  said:  "I  do  not  read  the  cases  as  having  laid 
down  that  unrebuttable  presumption  which  was  insisted  upon 
with  so  much  power  by  Mr.  Cohen,  All  the  cases,  when  they 
come  to  be  examined,  seem  to  establish  this  principle,  that  aU 
restraints  upon  trade  are  bad  as  being  in  violation  of  public 
policy,  unless  they  are  natural,  and  not  unreasonable  for  the 
protection  of  the  parties  in  dealing  legally  with  some  subject- 
matter  of  contract." 

And  again,  in  RousiUon  v.  RousiUon  [14  Ch,  D.  351],  Pry,  J., 
thus  expressed  himself:     "I  have  therefore,  upon  the  authori- 


THE  COMMON  LAW  41 

ties,  to  choose  between  two  sets  of  cases,  those  which  recognise 
and  those  which  refuse  to  recognise  this  supposed  rule ;  and, 
for  the  reasons  which  I  have  mentioned,  I  have  no  hesitation  in 
saying  that  I  adhere  to  those  authorities  which  refuse  to  recog- 
nise this  rule,  and  I  consider  that  the  cases  in  which  an  un- 
limited prohibition  has  been  spoken  of  as  void  relate  only  to 
circumstances  in  which  such  a  prohibition  has  been  unreason- 
able." 

I  do  not  intend  to  throw  doubt  on  what  was  decided  in  these 
cases,  for  reasons  which  will  appear  hereafter,  but  I  respectfully 
differ  from  the  view  which  appears  to  be  indicated  that  there 
was  not  at  any  time  a  rule  of  the  common  law  distinguishing 
particular  from  general  restraints,  and  treating  the  former 
only  as  exceptions  from  the  general  principle  that  contracts  in 
restraint  of  trade  are  invalid. 

The  discussion  on  which  I  have  been  engaged  is,  it  must  be 
admitted,  somewhat  academic.  For,  in  considering  the  appli- 
cation of  the  rule,  and  the  limitations,  if  any,  to  be  placed  on  it, 
I  think  that  regard  must  be  had  to  the  changed  conditions  of 
commerce  and  of  the  means  of  communication  which  have  been 
developed  in  recent  years.  To  disregard  these  would  be  to  miss 
the  substance  of  the  rule  in  a  blind  adherence  to  its  letter. 
Newcastle-upon-Tyne  is  for  all  practical  purposes  as  near  to 
London  to-day  as  towns  which  are  now  regarded  as  suburbs  of 
the  metropolis  were  a  century  ago.  An  order  can  be  sent  to 
Newcastle  more  quickly  than  it  could  then  have  been  transmitted 
from  one  end  of  London  to  the  other,  and  goods  can  be  con- 
veyed between  the  two  cities  in  a  few  hours  and  at  a  compara- 
tively small  cost.  Competition  has  assumed  altogether  different 
proportions  in  these  altered  circumstances,  and  that  which  would 
have  been  o-nce  merely  a  burden  on  the  covenantor  may  now  be 
essential  if  there  is  to  be  reasonable  protection  to  the  covenantee. 

When  Lord  Macclesfield  emphasized  the  distinction  between 
a  general  restraint  not  to  exercise  a  trade  throughout  the 
kingdom  and  one  which  was  limited  to  a  particular  place,  the 
reason  which  he  gave  for  the  distinction  was  that  "the  former 
of  these  must  be  void,  being  of  no  benefit  to  either  party,  and 
only  oppressive,  as  shall  be  shewn  by-and-by."  He  returns  to 
the  subject  later  on,  when  giving  the  reasons  why  all  voluntary 
restraints  are  regarded  with  disfavour  by  the  law,  in  these  terms : 

Kales  R.  of  T.  Vol.  1—4 


42      COIMBINATIONS  AND  RESTRAINT  OF  TRADE 

"Thirdly,  because  in  a  great  many  instances  they  can  be  of  no 
use  to  the  obligee;  which  holds  in  all  cases  of  general  restraint 
throughout  England ;  for  what  does  it  signify  to  a  tradesman  in 
London  what  another  does  at  Newcastle?  And  surely  it  would 
be  unreasonable  to  fix  a  certain  loss  on  one  side,  without  any 
benefit  to  the  other.  The  Roman  Law  would  not  enforce  such 
contracts  by  an  action.  (See  Puffendorf,  lib.  5,  c.  2,  §  3,  21 
H.  7,  20)."  There  are  other  passages  in  the  judgment  where 
this  view  is  enforced. 

There  is  no  doubt  that,  with  regard  to  some  professions  and 
commercial  occupations,  it  is  as  true  to-day  as  it  was  formerly, 
that  it  is  hardly  conceivable  that  it  should  be  necessary,  in 
order  to  secure  reasonable  protection  to  a  covenantee,  that  the 
covenantor  should  preclude  himself  from  carrying  on  such  pro- 
fession or  occupation  anywhere  in  England.  But  it  cannot  be 
doubted  that  in  other  cases  the  altered  circumstances  to  which 
I  have  alluded  have  rendered  it  essential,  if  the  requisite  pro- 
tection is  to  be  obtained,  that  the  same  territorial  limitations 
should  not  be  insisted  upon  which  would  in  former  days  have 
been  only  reasonable.  I  think,  then,  that  the  same  reasons  which 
led  to  the  adoption  of  the  rule  require  that  it  should  be  frankly 
recognised  that  it  cannot  be  rigidly  adhered  to  in  all  cases. 

My  Lords,  it  appears  to  me  that  a  study  of  Lord  Maccles- 
field's judgment  will  shew  that  if  the  conditions  which  prevail 
at  the  present  day  had  existed  in  his  time  he  would  not  have 
laid  down  a  hard-and-fast  distinction  between  general  and  par- 
ticular restraints,  for  the  reasons  by  which  he  justified  that  dis- 
tinction would  have  been  unfounded  in  point  of  fact. 

Whether  the  cases  in  which  a  general  covenant  can  now  be 
supported  are  to  be  regarded  as  exceptions  from  the  rule  which 
I  think  was  long  recognised  as  established,  or  whether  the  rule 
is  itself  to  be  treated  as  inapplicable  to  the  altered  conditions 
which  now  prevail,  is  probably  a  matter  of  words  rather  than  of 
substance.  The  latter  is  perhaps  the  sounder  view.  When  once 
it  is  admitted  that  whether  the  covenant  be  general  or  particular 
the  question  of  its  validity  is  alike  determined  by  the  considera- 
tion whether  it  exceeds  what  is  necessary  for  the  protection  of 
the  covenantee,  the  distinction  between  general  and  particular 
restraints  ceases  to  be  a  distinction  in  point  of  law. 

I  think  that  a  covenant  entered  into  in  connection  with  the 


THE  COMMON  LAW  43 

sale  of  the  good-will  of  a  business  must  be  valid  where  the  full 
benefit  of  the  purchase  cannot  be  otherwise  secured  to  the  pur- 
chaser. It  has  been  recognised  in  more  than  one  case  that  it  is 
to  the  advantage  of  the  public  that  there  should  be  free  scope 
for  the  sale  of  the  good- will  of  a  business  or  calling.  These  were 
cases  of  partial  restraint.  But  it  seems  to  me  that  if  there  be 
occupations  where  a  sale  of  the  good-will  would  be  greatly  im- 
peded, if  not  prevented,  unless  a  general  covenant  could  be 
obtained  by  the  purchaser,  there  are  no  grounds  of  public  policy 
which  countervail  the  disadvantage  which  would  arise  if  the 
good-will  were  in  such  cases  rendered  unsaleable. 

I  would  adopt  in  these  cases  the  test  which  in  a  case  of  partial 
restraint  was  applied  by  the  Court  of  Common  Pleas  in  Horner 
V.  Graves  [7  Bing.  735,  743],  in  considering  whetJier  the  agree- 
ment was  reasonable.  Tind^Uj,  C.  J.,  said:  "We  do  not  see  how 
a  better  test  can  be  applied  to  the  question,  whether  reasonable 
or  not,  than  by  considering  whether  the  restraint  is  such  only 
as  to  afford  a  fair  protection  to  the  interests  of  the  party  in 
favour  of  whom  it  is  given,  and  not  so  large  as  to  interfere  with 
the  interests  of  the  public.  Whatever  restraint  is  larger  than 
the  necessary  protection  of  the  party  can  be  of  no  benefit  to 
either ;  it  can  only  be  oppressive,  and,  if  oppressive,  it  is,  in  the 
eye  of  the  law,  unreasonable."  The  tendency  in  later  cases  has 
certainly  been  to  allow  a  restriction  in  point  of  space  which 
formerly  would  have  been  thought  unreasonable,  manifestly  be- 
cause of  the  improved  means  of  communication.  A  radius  of 
150  or  even  200  miles  has  not  been  held  too  much  in  some  cases. 
For  the  same  reason  I  think  a  restriction  applying  to  the  entire 
kingdom  may  in  other  cases  be  requisite  and  justifiable. 

I  must,  however,  guard  myself  against  being  supposed  to  lay 
down  that  if  this  can  be  shewn  the  covenant  will  in  all  cases  be 
held  to  be  valid.  It  may  be,  as  pointed  out  by  Lord  Bowen, 
that  in  particular  circumstances  the  covenant  might  neverthe- 
less be  held  void  on  the  ground  that  it  was  injurious  to  the  public 
interest. 

My  Lords,  I  turn  now  to  the  application  of  the  law  to  the  facts 
of  the  present  case.  It  seems  to  be  impossible  to  doubt  that  it 
is  shewn  that  the  covenant  is  not  wider  than  is  necessary  for 
the  protection  of  the  respondents.  The  facts  speak  for  them- 
selves.    Lf  the  covenant  embraced  anything  less  than  the  whole 


44      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  the  United  Kingdom  it  is  obvious  that  it  would  be  nugatory. 
The  only  customers  of  the  respondents  must  be  found  amongst 
the  governments  of  this  and  other  countries,  and  it  would  not 
practically  be  material  to  them  whether  the  business  were  car- 
ried on  in  one  part  of  the  United  Kingdom  or  another. 

So  far  I  have  dealt  only  with  the  covenant  in  relation  to  the 
United  Kingdom.  The  appellant  appeared  willing  to  concede 
that  it  might  be  good  if  limited  to  the  United  Kingdom ;  but  he 
contended  that  it  ought  not  to  be  world-wide  in  its  operation.  I 
think  that  in  laying  down  the  rule  that  a  covenant  in  restraint 
of  trade  unlimited  in  regard  to  space  was  bad,  the  courts  had 
reference  only  to  this  country.  They  would,  in  my  opinion,  in 
the  days  when  the  rule  was  adopted,  have  scouted  the  notion 
that  if  for  the  protection  of  the  vendees  of  a  business  in  this 
country  it  were  necessary  to  obtain  a  restrictive  covenant  em- 
bracing foreign  countries,  that  covenant  would  be  bad.  They 
certainly  would  not  have  regarded  it  as  against  public  policy 
to  prevent  the  person  whose  business  had  been  purchased  and 
was  being  carried  on  here  from  setting  up  or  assisting  rival 
businesses  in  other  countries;  and  for  my  own  part  I  see  noth- 
ing injurious  to  the  public  interests  of  this  country  in  upholding 
such  a  covenant. 

When  the  nature  of  the  business  and  the  limited  number  of 
customers  is  considered,  I  do  not  think  the  covenant  can  be  held 
to  exceed  what  is  necessary  for  the  protection  of  the  cove- 
nantees. 

I  move  your  Lordships,  therefore,  that  the  judgment  appealed 
from  be  affirmed,  and  the  appeal  dismissed. ^^ 

12 — See  to  the  same  effect  Eousil-  should,    it    would    seem,    be    valid: 

Ion   V.   Rousillon,   14   Ch.   Div.   351 ;  National     Enameling     &     Stamping 

Badisehe,  etc.,  v.  Schott,  L.  R.  [1892]  Co.    v.    Haberman,    120    Fed.    415 

3  Ch.  447;   Diamond  Match  Co.  v.  (contract  unlimited  in  time  and  re- 

Eoeber,  106  N.  Y.  47.3,  post,  p.  55.  striction    operative    throughout    the 

In  accordance  with  the  principal  United    States — held    legal).      But 

case,  upon  the  sale  of  a  world-wide  Davies  v.  Davies,  L.  E.  36  Ch.  Div. 

business  a  restriction  which  is  un-  359    (Ct.   of   Appeal,    1887),   seems 

limited    as    to    time    and    territory  contra. 


THE  COMMON  LAW    .-^  ft^  \J^  ^kf^j^  ^ 

BISHOP  V.  PALMEE         <'''\jel-  V^^*^    il 
(Supreme  Judicial  Court  of  Mass.,  1888.    146  Mass.  469.)     r)>^.    -^ 


Appeal  from  Superiw  Court,  Suffolk  couirty.  ^ 

Action  of  contract  by  Robert  Bishop  against  Elisha  L.  Palmei* .  .j^  ^  > 


/-^f^ 


1' 

et  al.     The  plaintiff's  declaration  was  as  follows:     "And  the       ^^ 
plaintiff  says  that  heretofore,  to-wit,  on  March  16,  1886,  the  ^^'-''ViV) 
defendants  made  with  the  plaintiff  the  written  contract  of  which  ^  ^ 

a  copy  is  hereto  annexed;  that  by  the  terms  of  said  contract,  ^^f^ 
and  for  the  considerations  therein  alleged,  the  defendants,  v^^ 
among  other  things,  promised  to  pay  to  the  plaintiff  the  sum  of  ' 
$5,000  in  ten  equal  monthly  installments,  on  the  first  day  of  _^. 
each  month,  thereafter,  until  all  were  paid;  that  the  plaintiff  ^  j^v^*^ 
has  done  and  performed  all  things  necessary,  by  the  terms  of 
said  contract,  to  entitle  him  to  receive  the  sum  of  $5,000,  but 
that  the  defendants  have  not  performed  their  said  promise,  and 
have  failed  and  neglected  to  pay  to  the  plaintiff  the  respective 
sums  of  $500  due  on  the  first  days  of  the  months  of  July,  August, 
September,  October,  and  November,  as  aforesaid;  wherefore 
the  plaintiff  says  that  the  defendants  owe  him  the  sum  of 
$2,500."  The  second  count  was  for  $2,500  upon  an  account 
annexed,  the  cause  of  action  being  the  same  as  in  the  first  count. 
To  the  declaration  the  defendants  filed  a  demurrer.  The  con- 
tract was,  in  substance,  as  follows :  ' '  This  agreement,  made  this 
sixteenth  day  of  March,  A.  D.  1886,  by  and  between  Robert 
Bishop  of  Boston,  party  of  the  first  part,  and  Elisha  L.  Palmer, 
FranJi  L.  Palmer,  Edward  A.  Palmer,  and  George  S.  Palmer, 
copartners,  .  .  .  parties  of  the  second  part,  and  the  Massa- 
soit  Manufacturing  Company,  a  corporation,  .  .  .  party  of 
the  third  part,  witnesseth,  that,  whereas,  said  party  of  the  first 
part  is  engaged  in  the  business  of  manufacturing  and  selling 
bed-quUts  and  comfortables,  together  with  all  his  plant,  machin- 
ery, and  stocks,  manufactured  and  unmanufactured,  now  on 
hand,  and  of  wholly  giving  up  and  going  out  of  said  business 
for  the  next  five  years,  and  is  also  desirous  of  selling  that  part 
of  his  cotton-waste  business  which  is  done  or  transacted  in  whole 
or  in  part  in  the  city  of  FaU  River,  .  .  .  and  with  any  and 
all  of  the  mills  doing  business  in  said  city;  now,  therefore,  in 
consideration  of  the  premises,  and  of  the  sum  of  $5,000,  to  be 
paid  by  the  parties  of  the  second  and  third  parts,  in  the  manner 


46      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

and  times  hereafter  specified,  the  party  of  the  first  part  hereby 
sells,  assigns,   transfers,  and  delivers  unto  the  parties  of  the 
second  part  his  entire  business,  plant,  and  enterprise  as  a  manu- 
facturer of,  and  dealer  in  bed-quilts  and  comfortables,  together 
with  the  good-will  of  said  business,  and  all  and  singular,  the 
machinery,  etc,  used  by  him  in  said  business,  and  constituting 
said  manufacturer's  plant,  as  foUows,  to-wit:     [Then  follows  an 
itemized  list  of  the  machinery,  etc.,  to  be  transferred  and  pro- 
visions for  the  delivery  of  the  same.]     And,  for  the  considera- 
tion named,  the  party  of  the  first  part  hereby  sells,  assigns, 
transfers,  and  conveys  to  the  party  of  the  third  part  all  that 
portion  of  his  waste  business  which  is  transacted  or  done  in  the 
city  of  Fall  River     .     .     .     with  any  and  all  corporations  doing 
business  in  said  city;  and  he  hereby  assigns  and  transfers  to 
said  party  of  the  third  part  all  his  existing  contracts,  whether 
verbal  or  written,  with  any  of  such  corporations,  or  with  firms 
or  persons,  and  all  rights  thereunder,  including  rights  of  re- 
newal, and  also  the  good-will  of  his  said  business  and  trade  with 
the  corporations  in  said  city  of  Fall  River.     This  clause  do€s 
not  have  any  reference  to  buying  and  selling  from  individuals, 
it  being  the  intention  of  said  party  of  the  first  part  absolutely 
and  completely  to  sell  and  transfer  to  said  party  of  the  third 
part  his  entire  cotton-waste  business,  trade,  and  dealings,  and 
the  exclusive  right  to  deal  and  do  a  cotton-waste  business  with, 
and  purchase  cotton  waste  of,  any  and  all  of  said  corporations, 
for  the  period  of  five  years  from  the  date  hereof.     And  said 
party  of  the  first  part  hereby,  for  himself,  his  executors,  and 
assigns,  covenants  and  agrees  w'Ah.  said  parties  of  the  second  and 
third  parts,  and  each  of  them,  and  their  executors,  adminis- 
trators, successors,  and  assigns,  resi>ectively,  that,  for  and  dur- 
ing the  period  of  five  years  from  the  date  hereof,  he  will  not, 
either  directly  or  indirectly,  in  his  ovm  name,  or  in  the  name  of 
any  other  person  or  persons,  continue  in,  carry  on,  or  engage  in 
the  business  of  manufacturing,  or  dealing  in,  bed-quilts  or  com- 
fortables, or  of  any  business  of  which  that  may  form  any  part. 
And  he  further  covenants  and  agrees,  as  aforesaid,  that,  for  and 
during  said  period,  he  will  not  enter  into  the  cotton-waste  busi- 
ness in  said  city  of  FaU  River  with  any  corporation,  firm,  or 
person  located  and  doing  business  in  said  city;  and  especially 
that  he  will  not,  directly  or  indirectly,  in  his  own  name,  or  in 


THE  COMIVION  LAW  47 

the  name  of  any  other  person,  buy,  or  influence  or  procure  other 
persons  to  buy,  any  cotton  waste  from  said  mills,  in  said  city  of 
Fall  River,  or  belonging  to  or  controlled  by  any  corporation 
located  in  said  city,  and  that  he  will  not,  either  directly  or 
indirectly,  make  any  bid  therefor,  or  influence  any  other  person 
so  to  do,  in  connection  with  the  waste  business  in  said  city,  or 
the  purchase  of  waste  from  such  parties. ' '  The  party  then  fur- 
ther agreed  not  to  buy,  or  offer  to  buy,  any  waste  produced  by 
certain  specified  corporations  in  Fall  River;  and  the  contract 
then  provided  that  the  payment  of  the  consideration  should  be 
in  installments  payable  as  set  forth  in  plaintiff's  declaration. 
The  Superior  Court  sustained  defendants'  demurrer,  and  the 
plaintiff  appealed  to  the  Supreme  Judicial  Court 

C.  ALLEN,  J.  The  defendants'  promise  which  is  declared 
on  was  made  in  consideration  of  the  sale  and  delivery  of  the 
business,  plant,  property,  and  contracts  of  the  plaintiff,  and  the 
faithful  performance  of  the  covenants  and  agreements  contained 
in  the  written  instrument  signed  by  the  parties.  The  parties 
made  no  apportionment  or  separate  valuation  of  the  different 
elements  of  the  consideration.  The  business,  plant,  property, 
contracts,  and  covenants  were  all  combined  as  forming  one  en- 
tire consideration.  There  is  no  way  of  ascertaining  what  valua- 
tion was  put  by  the  parties  upon  either  portion  of  it.  There  is 
no  suggestion  that  there  was  any  such  separate  valuation,  and 
any  estimate  which  might  now  be  put  upon  any  item  would  not 
be  the  estimate  of  the  parties. 

It  is  contended  by  the  defendants  that  each  one  of  the  three 
particular  covenants  and  agreements  into  which  the  plaintiff 
entered  is  illegal  and  void,  as  being  in  restraint  of  trade.  It  is 
sufficient  for  us  to  say  that  the  first  of  them  is  clearly  so,  it  being 
a  general  agreement,  without  any  limitation  of  space,  that,  for 
and  during  the  period  of  five  years,  he  will  not,  either  directly 
or  indirectly,  continue  in,  carry  on,  or  engage  in,  the  business 
of  manufacturing  or  dealing  in  bed-quilts  or  comfortables,  or 
of  any  business  of  which  that  may  form  any  part.  Thus  much 
is  virtually  conceded  by  the  plaintiff,  and  so  are  the  authorities. 
Taylor  v.  Blanchard,  13  Allen  370 ;  Dean  v.  Emerson,  102  Mass. 
480 ;  Machine  Co.  v.  Morse,  103  Mass.  73 ;  Alger  v.  Thaclier,  19 
Pick.  51;  Navigation  Co.  v.  Winsor,  20  Wall  64;  Davies  v. 


48      COMBINATIONS  AND  RESTRAINT  OP  TRADE 

Davies,  36  Ch.  Div.  359 ;  2  Kent,  Comra.  467,  note ;  Mete.  Cont. 
232. 

Two  principal  grounds  on  which  such  contracts  are  held  to 
be  void  are  that  they  tend  to  deprive  the  public  of  the  services 
of  men  in  the  employments  and  capacities  in  which  they  may  be 
most  useful,  and  that  they  expose  the  public  to  the  evils  of 
monopoly.    Alger  v.  Thacher,  ubi  supra. 

The  question  then  arises  whether  an  action  can  be  supported 
upon  the  promise  of  the  defendants  founded  upon  such  a  con- 
sideration as  that  which  has  been  described.  As  a  general  rule, 
where  a  promise  is  made  for  one  entire  consideration  a  part  of 
which  is  fraudulent,  immoral,  or  unlawful,  and  there  has  been 
no  apportionment  made,  or  means  of  apportionment  furnished, 
by  the  parties  themselves,  it  is  well  settled  that  no  action  will 
lie  upon  the  promise.  If  the  bad  part  of  the  consideration  is 
not  severable  from  the  good,  the  whole  promise  fails.  Robinson 
V.  Green,  3  Mete.  161;  Rand  v.  Mather,  11  Cush.  1;  Woodruff 
V.  Wentworth,  133  Ma^s.  309,  314 ;  Bliss  v.  Negus,  8  Mass.  51  ; 
Clark  V.  Ricker,  14  N.  H.  44 ;  Woodruff  v.  Hinman,  11  Vt.  592 ; 
Pickering  v.  Railway  Co.,  L.  R,  3  C.  P.  250;  Harrington  v. 
Dock  Co.,  3  Q.  B.  Div.  549;  2  Chit.  Cont.  (11th  Amer.  Ed.) 
972 ;  Leake,  Cont.  779,  780 ;  Pol.  Cont.  321 ;  Mete.  Cont.  247. 

It  is  urged  that  this  rule  does  not  apply  to  a  stipulation  of 
this  character  which  violates  no  penal  statute,  which  contains 
nothing  maluTn  in  se,  and  which  is  simply  a  promise  enforceable 
at  law.  But  a  contract  in  restraint  of  trade  is  held  to  be  void 
because  it  tends  to  the  prejudice  of  the  public.  It  is  therefore 
deemed  by  the  law  to  be  not  merely  an  insufficient  or  invalid 
consideration,  but  a  vicious  one.  Being  so,  it  rests  on  the  same 
ground  as  if  such  contracts  were  forbidden  by  positive  statutes. 
They  are  forbidden  by  the  common  law,  and  are  held  to  be 
illegal.  2  Kent,  Comm.  466;  Mete.  Cont.  221;  2  Chit.  Cont. 
974 ;  White  v.  Buss,  3  Cush.  449,  450 ;  Hynds  v.  Hays,  25  Ind. 
31,  36. 

It  is  contended  that  the  defendants,  by  being  unable  to  en- 
force the  stipulation  in  question,  only  lose  what  they  knew,  or 
were  bound  to  know,  was  legally  null ;  that  they  have  all  that 
they  supposed  they  were  getting,  namely,  a  promise  which  might 
be  kept,  though  incapable  of  legal  enforcement;  and  that  if 
they  were  content  to  accept  such  promise,  and  if  there  is  another 
good  and  sufficient  consideration,  they  may  be  held  upon  their 


THE  COMMON  LAW  49 

promise.  But  this  agreement  cannot  properly  extend  to  a  case 
where  a  part  of  an  entire  and  inseparable  consideration  is  posi- 
tively vicious,  however  it  might  be  where  it  was  simply  invalid, 
as  in  Parish  v.  Stone,  14  Pick.  198.  The  law  visits  a  contract 
founded  on  such  a  consideration  with  a  positive  condemnation, 
which  it  makes  effectual  by  refusing  to  support  it,  in  whole  or 
in  part,  where  the  consideration  cannot  be  severed. 

The  fact  that  the  plaintiff  had  not  failed  to  perform  his  part 
of  the  contract,  does  not  enable  him  to  maintain  his  action.  An 
illegal  consideration  may  be  actual,  and  substantial,  and  valu- 
able, but  it  is  not,  in  law,  sufScient. 

The  plaintiff  further  suggests  that,  if  the  defendants  were  to  ^^^^^^^aJ^^ 
sue  him  on  this  contract,  they  could  clearly,  so  far  as  the  ques-  jj^j^    oj 
tion  of  legality  is  concerned,  maintain  an  action  upon  all  ita 
parts,  except,  possibly,  the  single  covenant  in  question.    Mallan   <^e■^'''^^ 
v.  May,  11  Mees.  &  W.  653 ;  Green  v.  Price,  13  Mees.  &  W.  695,   K"^^^ 
16  Mees.  &  W.  346.    This  may  be  so.    If  they  pay  to  the  plain-   ^    ct^' 
tiff  the  whole  sum  called  for  by  the  terms  of  the  contract,  it 
may  well  be  that  they  can  call  on  him  to  perform  all  of  his 
agreement,  except  such  as  are  unlawful.     In  such  case,  they 
would  merely  waive  or  forego  a  part  of  what  they  were  to  re- 
ceive, and  recover  or  enforce  the  rest.     It  does  not,  however, 
follow  from  this  tliat  they  can  be  compelled  to  pay  the  sum 
promised  by  them,  when  a  part  of  the  consideration  of  such 
promise  was  illegal.    They  are  at  liberty  to  repudiate  the  con- 
tract on  this  ground,  and,  having  done  so,  the  present  action 
founded  on  the  contract  cannot  be  maintained;  and  it  is  not 
now  to  be  determined  what  other  liability  the  defendants  may 
be  under  to  the  plaintiff,  by  reason  of  what  they  may  have  re- 
ceived under  the  contract. 

Judgment  affirmed}^ 

13 — A  fortiori,  a  restriction  lack-  restriction    limited    to    the    United 

ing  in  limitation  as  to  time  or  terri-  States  was  illegal  because  not  suffi- 

tory,  would  usually  be  held  illegal,  ciently     limited     as     to     territory: 

as   in    Alger    v.    Thacher,    19    Pick.  Lange  v.  Werk,  2  Oh.  St.  519;  Luf- 

(Mass.)   51;  Berlin  Machine  "Works  kin  Eule  Co.  v.  Fringeli,  57  Oh.  St. 

V.   Perry,   71   Wis.   495;    Thomas  v.  596. 

Adm  'r  of  Miles,  3  Oh.  St.  274 ;  Wiley  The  restriction  has  even  been  held 

V.    Baumgardner,    97    Ind.    66    (five  illegal  when  operative  throughout  a 

year  limitation,  but  no  limit  as  to  state  of  the  United  States:     Taylor 

territory— contract  illegal).  v.  Blanchard,  13  Allen  (Mass.)  370. 

It    has    been    held    also    that    a 

Kales  R.  of  T.  Vol.  1—4 


50      COMBINATIONS  AND  RESTRAINT  OF  TRADE 


GAMEWELL  FIRE-ALARM  CO.  v.  CRANE 


(Supreme  Judicial  Court  of  Mass.,   1893. 

N.  E.  R.  98.) 


160  Mass.   50;  35 


0^^ 


«v^' 


<^' 


Appeal  from  Superior  Court,  Suffolk  county. 

Bill  by  the  Gamewell  Fire-Alarm  Telegraph  Company  against 
Moses  G.  Crane  and  Frederick  W.  Cole  to  enjoin  defendant 
Crane  from  engaging  in  the  manufacture  and  sale  of  fire  alarm 
and  police  telegraph  apparatus,  in  violation  of  his  contract  with 
plaintiff,  and  to  enjoin  defendant  Cole  from  participating  with 
Crane  in  the  violation  of  said  contract.  Final  decree  was  entered 
in  plaintiff's  favor  as  against  defendant  Crane,  but  the  bill  was 
dismissed  as  against  Cole,  Plaintiff  and  defendant  Crane  both 
appeal. 

Modified. 


i  ^f 


,-v^ 


:j-<- 


FIELD,  C.  J.  The  plaintiff  company  and  the  defendant 
Crane  have  each  appealed  from  the  decree  of  the  Superior  Court. 
The  principal  question  is  whether  the  following  stipulation  in 
the  contract  between  the  plaintiff  and  Crane  is  void.  The  stipu- 
lation is:  "Said  Crane  further  agrees  not  to  engage  in  the 
business  of  manufacturing  or  selling  fire  alarm  or  police  tele- 
graph machines  and  apparatus,  and  not  to  enter  into  competition 
with  said  Gamewell  Company,  either  directly  or  indirectly,  for 
the  period  of  ten  years  next  ensuing  after  the  date  of  this  agree- 
ment. ' '  Crane  had  been  a  manufacturer  of  fire  alarm  and  police 
telegraph  apparatus  from  the  year  1856  to  1886,  when  the  con- 
tract was  entered  into  which  is  the  subject  of  this  suit.  From 
the  year  1879  to  January,  1891,  he  was  a  director  of  the  plaintiff 
company.  In  1881  he,  or  the  finn  of  which  he  was  a  member, 
entered  into  a  contract  with  the  plaintiff  company  to  do  all  of 
its  manufacturing.  He  testified  that  the  company  "was  to  have 
the  use  of  patents  of  mine  for  the  term  of  ten  years,  and  to  give 
all  its  manufacturing  to  Moses  C.  Crane  or  Crane  &  Co.,  and 
they  agreed  not  to  compete  with  the  Gamewell  Company  during 
that  time."  This  is  the  contract  which  was  annulled  by  the  con- 
tract in  suit.  By  the  contract  in  suit  Crane  sold  and  conveyed 
to  the  company  all  his  machinery,  tools,  draw  cases,  and  other 
property  used  in  or  connected  with  his  business  of  manufactur- 
ing for  said  company,  including  "stock  supplies  partly  manu- 


THE  COMMON  LAW  51 

factured,  and  raw  material  of  every  kind  in  any  way  pertaining" 
to  said  business  of  manufacturing  in  his  factory  at  Newton 
Highlands,  in  Massachusetts,  and  he  agreed  to  transfer  to  said 
company  exclusive  rights  under  and  control  of  all  letters  patent 
for  fire  alarm  and  police  apparatus  only,  owned  or  controlled 
wholly  or  in  part  by  him,  together  with  exclusive  rights  under 
and  control  of  all  improvements  in  said  fire  alarm  and  police 
apparatus  only,  made  by  him  up  to  the  date  of  the  contract,  and 
he  gave  to  said  company  the  ''first  option  to  purchase  or  obtain 
exclusive  control  for  fire  alarm  and  police  purposes  only,  under 
any  and  all  letters  patent,  improvements  applicable  to  such 
apparatus  which  may  be  made  by  said  Crane  during  the  term 
of  ten  3^ears  next  ensuing  after  the  date  of  this  agreement, ' '  etc. 
The  consideration  to  be  paid  was  $30,000  in  cash  and  notes,  and 
such  unwrought  stock,  machinery,  etc.,  as  was  on  hand  at  the 
date  of  the  transfer,  and  was  not  included  in  the  schedule  at- 
tached to  the  contract,  was  also  to  be  paid  for  at  the  "cost 
price,  to  be  fixed  by  appraisal."  Crane  also  agreed  to  let  his 
factory  to  the  company  at  a  reasonable  rent  if  the  company  de- 
sired to  hire  it.  The  company  actually  paid  Crane  about  $47,000 
as  the  consideration  of  the  contract  and  the  property  conveyed. 

Thej>laintiff  contends  that  the  agreement  "not  to  engage  inl 
the  business  of  manufacturing  or  selling  fire  alarm  or  police- 
telegraph  machines  and  apparatus,  and  not  to  enter  into  com-  . 
petition  with  said  Gamewell   Com.pany,  either  directly  or  in-  \ 
directly,  for  the  period  of  ten  years,"  etc.,  is  not  void  as  being 
in  restraint  of  trade — First,  because  it  is  an  agreement  pertain^ 
ing  to  "property  and  business  protected  by  patents;"  secondly, 
because  the  restraint  is  coextensive  only  with  the  business  sold, 
and  is  necessary  to  enable  the  company  to  enjoy  fully  what  it 
has  bought  and  paid  for;  and,  thirdly,  because  it  relates  to  a 
single  commodity,  not  of  prime  neoess.ity,  and  not  a  staple  of 
commerce.    See  Roller  Co.  v.  Cushman,  143  Mass.  353 ;  Machine 
Co.  V.  Morse,  103  Mass.  73;  Gloucester  Isinglass  &  Glue  Co.  v. 
Russia  Cement  Co.,  154  Mass.  92. 

There  seems  to  be  no  reason  why  the  defendant  Crane  should 
not  assign  the  patents  and  inventions  which  he  agreed  to  assign, 
if  there  are  any,  and  no  serious  objection  has  been  raised  by 
the  defendant  on  this  part  of  the  case.  The  defendant  contends 
that  he  has  a  right  to  assist  in  forming  a  corporation,  and  to  act 


52      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

as  one  of  its  officers,  the  business  of  which  is  to  manufacture  and 
sell  fire  alarm  and  police  telegraph  machines  which  are  not  made 
under  any  patents  owned  by  the  plaintiff,  or  under  any  patents 
which  he  has  agreed  to  assign  to  the  plaintiff,  or  which  the 
plaintiff  has  elected  to  purchase,  under  the  option  given  in  the 
contract,  even  although  by  so  doing  he  enters  into  competition 
with  the  plaintiff  in  its  business.  He,  in  effect,  concedes  that, 
so  far  as  the  business  is  protected  by  patents  which  he  has 
assigned  or  agreed  to  assign,  the  restraint  is  valid.  It  appears 
that  there  are  "a  dozen  or  fifteen  concerns  in  the  United  States 
engaged  in  a  somewhat  similar  business."  The  defendant  testi- 
fied that  he  looked  up  the  number  of  patents  pertaining  to  this 
branch  of  the  art  in  1881,  and  that  there  were  then  about  500. 
The  defendant  contends  that  he  ought  to  be  able  to  use  his  own 
patents  for  subsequent  improvements  applicable  to  such  appara- 
tus if  the  plaintiff  does  not  elect  to  purchase  them ;  that  he  was 
previously  a  manufacturer  of  fire  alarm  and  police  telegraph 
apparatus,  and  not  a  seller  thereof;  that  the  good-will  which 
attached  to  his  business  was  that  of  a  manufacturer  who  did  not 
sell  his  manufactures  in  the  market ;  and  that  it  is  against  public 
policy  that  he  should  be  restrained  from  exercising  his  peculiar 
skill  anywhere  in  the  United  States  or  in  the  world  for  the 
period  of  10  years.  The  apparatus,  as  the  defendant  contends, 
I  which  he  has  a  right  to  manufacture  and  sell  is  not  secret  ma- 
chinery, and  is  not  protected  by  any  patents  which  the  plaintiff 
owns  or  has  a  right  to  control,  but  is  apparatus  either  not  pro- 
tected by  patents  at  all,  or  by  patents  of  his  own,  or  of  some 
other  persons  who  may  choose  to  employ  the  defendant. 

The  only  ground,  then,  on  which  this  restriction  can  be  main- 
tained  is  that  it  is  reasonably  necessary  for  the  beneficial  enjoy- 
ment by  tlie  plaintiff  of  the  property  it  bought  of  the  defendant, 
or,  if  this  is  not  so,  that  the  law  in  modem  times  does  not  regard 
such  an  agreement  as  against  public  policy.  So  far  as  we  are 
aware,  in  every  modern  case  in  this  commonwealth,  except  one 
where  a  contract  in  restraint  of  trade  has  been  held  valid,  the 
restriction  has  been  limited  as  to  space.  In  Taylor  v.  Blanchard, 
13  Allen  370,  the  parties  entered  into  a  partnership  for  carry- 
ing on  "the  trade  or  business  of  manufacturing  shoe  cutters," 
and  it  was  provided  that  "at  whatever  time  the  said  copartner- 
ship shall  be  determined  and  ended"  the  defendant  "shall  not. 


THE  COMMON  LAW  53 

nor  will  at  any  time  or  times  hereafter,  either  alone  or  jointly 
with  or  as  agent  for  any  person  or  persons  whomsoever,  set  up, 
exercise,  or  carry  on  the  said  trade  or  business  of  manufacturing 
and  selling  shoe  cutters  at  any  place  within  the  aforesaid  com- 
monwealth of  Massachusetts,  and  shall  not,  nor  will  set  up, 
make,  or  encourage  any  opposition  to  the  said  trade  or  business 
hereafter  to  be  carried  on"  by  the  plaintiff.  The  manufacture 
of  shoe  cutters  was  an  art,  which  could  be  carried  on  only  by 
persons  instructed  in  it,  and  the  business  was  confined  to  the 
plaintiff  and  three  other  persons ;  but  the  court  held  the  agree- 
ment void. 

In  Bishop  v.  Palmer,  146  Mass.  469,  the  plaintiff,  being  en- 
gaged in  the  manufacturing  and  selling  of  bed-quilts  and  com- 
fortables, conveyed  to  the  defendant  his  "entire  business  plant 
and  enterprise  as  a  manufacturer  of  and  dealer  in  bed-quilts  and 
comfortables,"  together  with  the  good  will  of  the  business, 
and  all  the  machinery,  implements,  and  utensils  used  by  him  in 
said  business,  and  agreed  "that  for  and  during  the  period  of 
five  years  from  the  date  hereof  he  will  not,  either  directly  or 
indirectly,  in  his  own  name  or  in  the  name  of  any  other  person 
or  persons,  continue  in,  carry  on,  or  engage  in  the  business  of 
manufacturing  or  dealing  in  bed-quilts  or  comfortables,  or  of 
any  business  of  which  that  may  form  any  part."  It  was  held 
that  this  was  clearly  illegal  and  void  as  being  in  restraint  of 
trade,  because  not  limited  as  to  space.  See,  also,  Alger  v. 
Thacher,  19  Pick.  51 ;  Pierce  v.  Fuller,  8  Mass.  223,  226 ;  Perkins 
V.  Lyman,  9  Mass.  522 ;  Steams  v.  Barrett,  1  Pick.  43 ;  Palmer  v. 
Stebbins,  3  Pick.  188 ;  Oilman  v.  Dwight,  13  Gray  356 ;  Augier 
V.  Webber,  14  Allen  211;  Dean  v.  Emerson,  102  Mass.  480; 
Dwight  V.  Hamilton,  113  Mass.  175 ;  Boutelle  v.  Smith,  116  Mass. 
Ill ;  Hopes  V.  Upton,  125  Mass.  258 ;  Handforth  v.  Jackson,  150 
Mass.  149. 

The  case  of  Machine  Co.  v.  Morse,  w&^  supra,  is  the  case  re- 
ferred to  as  an  exception.  The  question  arose  upon  demurrer. 
The  agreement  of  the  defendant  was  not  only  to  transfer  his 
patents,  machinery,  etc.,  and  all  improvements  and  inventions, 
but  "that  he  will  use  his  best  efforts  for  the  perfecting  of  im- 
provements in  the  business  and  manufacture,  and  for  such  alter- 
ations and  combinations  as  may  tend  to  insure  the  success  of 
the  same  and  of  the  company,"  and  that  he  "will  do  no  act  that 


54      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

may  injure  the  company  or  its  business,  and  that  he  will  at  no 
time  aid,  assist,  or  encourage  in  any  manner  any  competition 
against  the  same."  He  also  agreed  "to  serve  as  the  superin- 
tendent of  the  company  for  three  years,"  etc.  The  plaintiff 
company  was  formed  by  the  defendant  and  others,  and  the 
defendant's  business  was  transferred  to  it.  He  was  a  stock- 
holder, and  was  made  superintendent.  The  plaintiff  agreed  to 
employ  the  defendant  for  three  years,  and  he  was  actually  em- 
ployed as  superintendent  up  to  the  time  he  entered  upon  a  com- 
peting business.  The  case  seems  to  have  been  decided  on  the 
ground  that  the  defendant  had  agreed  to  give  to  the  plaintiff 
his  exclusive  services  with  reference  to  his  mechanical  skill  and 
ingenuity  in  all  improvements,  alterations,  and  combinations 
which  would  tend  to  insure  the  success  of  the  plaintiff  in  manu- 
facturing twist  drills  and  collets.  The  court  say  that  "the 
same  principle  that  enables  a  partner  to  bind  himself  to  do 
nothing  in  competition  with  the  business  of  the  firm  ought  to 
apply  to  him."  The  opinion  proceeds  to  consider  the  English 
cases  where  the  restriction  was  held  not  to  extend  beyond  the 
good  will  of  the  business  which  was  the  subject  of  the  sale,  or 
was  not  gi-eater  than  the  interests  of  the  vendee  required,  and 
was  not  unreasonable  in  view  of  all  the  circumstances.  This 
doctrine,  in  England,  has  been  carried  very  far.  See  Davies  v. 
Davies,  36  Ch.  Div.  359.  In  this  country  the  courts  generally 
have  not  gone  so  far,  but  the  old  law  has  been  a  good  deal  modi- 
fied in  some  jurisdictions  in  view  of  modem  methods  of  doing 
business.  See  Navigation  Co.  v.  Winsor,  20  Wall.  64;  Fowle  v. 
Park,  131  U.  S.  88;  Ellerman  v.  Stockyards  Co.,  (N.  J.  Ch.)  23 
Atl.  Rep.  287 ;  Association  v.  Starkey,  84  ]\Iich.  76 ;  Matthews  v. 
Associated  Press,  (N.  Y.  App.)  32  N.  E.  Rep.  981;  Oliver  v. 
Gilmore,  52  Fed.  Rep.  562 ;  Match  Co.  v.  Roeber,  106  N.  Y.  473 ; 
Wliitney  v.  Slayton,  40  Me.  224.      . 

In  the  present  case  the  plaintiff  did  not  buy  the  good  will  of 
a  mercantile  business,  and  the  defendant  Crane  had  no  customers 
for  fire  alarm  and  police  telegraph  machines  and  apparatus. 
The  plaintiff  gets  evei-ything  it  bought  if  it  gets  the  tangible 
property  and  the  letters  patent  and  the  improvements  which  the 
defendant  Crane  agreed  to  convey.  The  stipulation  that  Crane 
will  not  for  10  years  manufacture  or  sell  fire  alarm  or  police 
telegraph   machines    and    apparatus,    although   under   patents, 


THE  C0M3I0N  LAW  55 

in  which  case  it  has  refused  to  buy,  or  under  no  patent  at  all, 
will  tend  to  give  the  plaintiff  a  monopoly  of  the  business.  To 
exclude  a  pei-son  from  manufacturing  or  selling  anywhere  in 
the  United  States  or  in  the  world  machinery  designed  for  certain 
purposes,  in  which  that  person  has  acquired  great  skill,  may 
operate  to  impair  his  means  of  earning  a  living. 

The  stipulation  seems  to  us  to  be  something  more  than  is 
reasonably  necessary  to  protect  the  plaintiff  in  the  enjoyment 
of  the  property  it  bought,  even  if  that  should  be  adopted  as  the 
test,  upon  which  we  express  no  opinion.  The  principal  object 
of  the  stipulation  was,  we  think,  to  prevent  the  manufacture  or 
sale  by  the  defendant  of  any  instruments  which  would  serve  the 
same  purpose  as  those  made  and  sold  by  the  plaintiff,  and  thus 
to  enable  the  plaintiff  more  completely  to  control  the  market. 
Large  cities  and  towns  cannot  well  do  without  some  kind  of  fire 
alarm  and  police  telegraph  apparatus,  and  it  is  an  article  of 
necessity  for  such  municipalities.  We  are  of  the  opinion  that 
under  our  decisions  the  stipulation  must  be  pronounced  void  as 
against  public  policy.  If  there  is  to  be  a  change  in  the  law,  as 
heretofore  many  times  declared  by  this  court,  we  think  it  is  for 
the  legislature  to  mal^e  it.  See  Factor  Co.  v.  Adler,  (Cal.)  27 
Pac.  Rep.  36 ;  Taylor  v.  Sourman,  110  Pa.  St.  3 ;  Richardson  v. 
Buhl,  77  Mich.  632;  Herreshoff  v.  Boutineau,  (R.  I.)  19  Atl. 
Rep.  712;  Strait  v.  Harrow  Co.,  (Sup.)  18  N.  Y.  Supp.  224; 
Anderson  v.  Jett,  (Ky.)  12  S.  W.  Rep.  670;  Urmston  v.  White- 
legg,  63  Law  T.  R.  (N.  S.)  455;  Perls  v.  Saalfeld,  [1892]  2  Ch. 
149. 

For  these  reasons  a  majority  of  the  court  are  of  opinion  that 
the  decree  against  Crane  should  be  substantially  affirmed  as  to 
the  assignment  of  patents  and  inventions  and  as  to  costs,  and 
should  be  reversed  as  to  the  rest.  The  decree  in  favor  of  Cole 
should  be  affirmed. 

So  ordered. 


DIAMOND  MATCH  CO.  v.  ROEBER 

(Court  of  Appeals  of  New  York,  1887.     106  N.  Y.  473.) 

ANDREWS,  J.    Two  questions  are  presented — First,  whether 
the  covenant  of  the  defendant  contained  in  the  bill  of  sale  exe- 


56      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

cuted  by  him  to-  the  Swift  &  Courtney  &  Beecher  Company  on 
the  twenty-seventh  day  of  August,  1880,  that  he  shall  and  will 
not  at  any  time  or  times  within  99  years,  directly  or  indirectly 
engage  in  the  manufacture  or  sale  of  friction  matches  (excepting 
in  the  capacity  of  agent  or  employee  of  the  said  Swift  &  Court- 
ney &  Beecher  Company)  within  any  of  the  several  states  of  the 
United  States  of  America,  or  in  the  territories  thereof,  or  within 
the  District  of  Columbia,  excepting  and  reserving,  however,  the 
right  to  manufacture  and  sell  friction  matches  in  the  state  of 
Nevada,  and  in  the  territory  of  Montana,  is  void  as  being  a 
covenant  in  restraint  of  trade;  and,  second,  as  to  the  right  of 
the  plaintiff,  under  the  special  circumstances,  to  the  equitable 
remedy  by  injunction  to  enforce  the  performance  of  the  cov- 
enant. 

There  is  no  real  controversy  as  to  the  essential  facts.  The 
consideration  of  the  covenant  was  the  purchase  by  the  Swift  & 
Courtney  &  Beecher  Company,  a  Connecticut  corporation,  of 
the  manufactory  No.  528  West  Fiftieth  street,  in  the  city  of 
New  York,  belonging  to  the  defendant,  in  which  he  had,  for 
several  years  priar  to  entering  into  the  covenant,  carried  on  the 
business  of  manufacturing  friction  matches,  and  of  the  stock  and 
materials  on  hand,  together  with  the  trade,  trade-marks,  and 
good  will  of  the  business,  for  the  aggregate  sum  (excluding  a 
mortgage  of  $5,000  on  the  property  assumed  by  the  company) 
of  $46,724.05,  of  which  $13,000  was  the  price  of  the  real  estate. 
By  the  preliminary  agreement  of  July  27,  1880,  $28,000  of  the 
purchase  price  was  to  be  paid  in  the  stock  of  the  Swift  &  Court- 
ney &  Beecher  Company.  This  was  modified  when  the  property 
was  transferred,  August  27,  1880,  by  giving  to  the  defendant 
the  option  to  receive  the  $28,000  in  the  notes  of  the  company  or 
in  its  stock,  the  option  to  be  exercised  on  or  before  January  1, 
1881.  The  remainder  of  the  purchase  price,  $18,724.05,  was 
paid  down  in  cash,  and  subsequently,  March  1,  1881,  the  de- 
fendant accepted  from  the  plaintiff,  the  Diamond  Match  Com- 
pany, in  full  payment  of  the  $28,000,  the  sum  of  $8,000  in  cash 
and  notes,  and  $20,000  in  the  stock  of  the  plaintiff ;  the  plaintiff 
company  having  prior  to  said  payment  purchased  the  property 
of  the  Swift  &  Courtney  &  Beecher  Company,  and  become  the 
assignee  of  the  defendant's  covenant.  It  is  admitted  by  the 
pleadings  that  in  August,  1880  (when  the  covenant  in  question 


THE  COMMON  LAW  57 

was  made),  the  Swift  &  Courtney  &  Beecher  Company  carried 
on  the  business  of  manufacturing  friction  matches  in  the  states 
of  Connecticut,  Delaware,  and  Illinois,  and  of  selling  the 
matches  which  it  manufactured  "in  the  several  states  and  terri- 
tories of  the  United  States,  and  in  the  District  of  Columbia;" 
and  the  complaint  alleges  and  the  defendant  in  his  answer 
admits  that  he  was  at  the  same  time  also  engaged  in  the  manu- 
facture of  friction  matches  in  the  city  of  New  York,  and  in 
selling  them  in  the  same  territory.  The  proof  tends  to  support 
the  admission  in  the  pleadings.  It  was  shown  that  the  defend- 
ant employed  traveling  salesmen,  and  that  his  matches  were 
found  in  the  hands  of  dealers  in  10  states.  The  Swift  &  Court- 
ney &  Beecher  Company  also  sent  their  matches  throughout  the 
country  wherever  they  could  find  a  market.  When  the  bargain 
was  consummated,  on  the  twenty-seventh  of  August,  1880,  the 
defendant  entered  into  the  employment  of  the  Swift  &  Courtney 
&  Beecher  Company,  and  remained  in  its  employment  until 
January,  1881,  at  a  salary  of  $1,500  a  year.  He  then  entered 
into  the  employment  of  the  plaintiff,  and  remained  with  it  dur- 
ing the  year  1881,  at  a  salary  of  $2,500  a  year,  and  from  Janu- 
ary 1,  1882,  at  a  salary  of  $3,600  a  year,  when,  a  disagreement 
arising  as  to  the  salary  he  should  thereafter  receive,  the  plaintiff 
declining  to  pay  a  salary  of  more  than  $2,500  a  year,  the  de- 
fendant voluntarily  left  its  service.  Subsequently  he  became 
superintendent  of  a  rival  match  manufacturing  company  in 
New  Jersey,  at  a  salary  of  $5,000,  and  he  also  opened  a  store  in 
New  York  for  the  sale  of  matches  other  than  those  manufactured 
by  the  plaintiff. 

The  contention  by  the  defendant  that  the  plaintiff  has  no 
equitable  remedy  to  enforce  the  covenant,  rests  mainly  on  the 
fact  that  contemporaneously  with  the  execution  of  the  covenant 
of  August  27,  1880,  the  defendant  also  executed  to  the  Swift  & 
Courtney  &  Beecher  Company  a  bond  in  the  penalty  of  $15,000, 
conditioned  to  pay  that  sura  to  the  company  as  liquidated  dam- 
ages in  case  of  a  breach  of  his  covenant. 

The  defendant  for  his  main  defense  relies  upon  the  ancient 
doctrine  of  the  common  law,  first  definitely  declared,  so  far  as  I 
can  discover,  by  Chief  Justice  Parker  (Lord  Macclesfield)  in 
the  leading  case  of  Mitchel  v.  Reynolds,  1  P.  Wms.  181,  and 
which  has  been  repeated  many  times  by  judges  in  England  and 


58      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

America,  that  a  bond  in  general  restraint  of  trade  is  void.  There 
are  several  decisions  in  the  English  courts  of  an  earlier  date,  in 
which  the  question  of  the  validity  of  contracts  restraining  the 
obligor  from  pursuing  his  occupation  within  a  particular  locality 
was  considered.  The  cases  are  chronologically  arranged  and 
stated  by  Mr.  Parsons  in  his  work  on  Contracts  (volume  2,  p. 
748,  note).  The  earliest  reported  case,  decided  in  the  time  of 
Henry  V,  was  a  suit  on  a  bond  given  by  the  defendant,  a  dyer, 
not  to  use  his  craft  within  a  certain  city  for  the  space  of  half  a 
year.  The  judge  before  whom  the  case  came  indignantly  de- 
nounced the  plaintiff  for  procuring  such  a  contract,  and  turned 
him  out  of  court.  This  was  followed  by  cases  arising  on  con- 
tracts of  a  similar  character,  restraining  the  obligors  from  pur- 
suing their  trade  within  a  certain  place  for  a  certain  time,  which 
apparently  presented  the  same  question  which  had  been  decided 
in  the  dyer's  case,  but  the  courts  sustained  the  contracts,  and 
gave  judgment  for  the  plaintiffs ;  and  before  the  case  of  Mitchel 
V,  Reynolds  it  had  become  settled  that  an  obligation  of  this 
character,  limited  as  to  time  and  space,  if  reasonable  under  the 
circumstance,  and  supported  by  a  good  consideration,  was  valid. 
The  case  in  the  Year  Books  went  against  all  contracts  in  re- 
straint of  trade,  whether  limited  or  general.  The  other  cases 
prior  to  Mitchel  v.  Reynolds  sustained  contracts  for  a  particular 
restraint,  upon  special  grounds,  and  by  inference  decided 
against  the  validity  of  general  restraints.  The  case  of  Mitchel 
V.  Reynolds  was  a  case  of  partial  restraint,  and  the  contract  was 
sustained.  It  is  worthy  of  notice  that  most,  if  not  all,  the  Eng- 
lish cases  which  assert  the  doctrine  that  all  contracts  in  general 
restraint  of  trade  are  void,  were  cases  where  the  contract  before 
the  court  was  limited  or  partial.  The  same  is  generally  true 
of  the  American  cases.  The  principal  cases  in  this  state  are  of 
that  character,  and  in  all  of  them  the  particular  contract  before 
the  court  was  sustained.  Nobles  v.  Bates,  7  Cow.  307 ;  Chappel 
V.  Brockway,  21  Wend.  157 ;  Dunlop  v.  Gregory,  10  N.  Y.  241. 
In  Alger  v.  Thacher,  19  Pick.  51,  the  case  was  one  of  general 
restraint,  and  the  Court,  construing  the  rule  as  inflexible  that 
all  contracts  in  general  restraint  of  trade  are  void,  gave  judg- 
ment for  the  defendant.  In  Mitchel  v.  Reynolds  the  Court,  in 
assigning  the  reason  for  the  distinction  between  a  contract  for 
the  general  restraint  of  trade  and  one  limited  to  a  particular 


THE  COMaiON  LAW  59 

place,  says:  "for  the  former  of  these  must  be  void,  being  of  no 
benefit  to  either  party,  and  only  oppressive;"  and  later  on, 
"because  in  a  great  many  instances  they  can  be  of  no  use  to  the 
obligee,  which  holds  in  all  cases  of  general  restraint  throughout 
England ;  for  what  does  it  signify  to  a  tradesman  in  London 
what  another  does  in  Newcastle,  and  surely  it  would  be  unrea- 
sonable to  fix  a  certain  loss  on  one  side  without  any  benefit  to 
the  other."  He  refers  to  other  reasons,  viz.,  the  michief  which 
may  arise  ( 1 )  to  the  party  by  the  loss  by  the  obligor  of  his  live- 
lihood and  the  substance  of  his  family,  and  (2)  to  the  public  by 
depriving  it  of  a  useful  member,  and  by  enabling  corporations 
to  gain  control  of  the  trade  of  the  kingdom.  It  is  quite  obvious 
that  some  of  these  reasons  are  much  less  forcible  now  than  when 
Mitchel  V.  Reynolds  was  decided.  Steam  and  electricity  have 
for  the  purposes  of  trade  and  commerce  almost  annihilated  dis- 
tance, and  the  whole  world  is  now  a  mart  for  the  distribution  of 
the  products  of  industry.  The  great  diffusion  of  wealth,  and 
the  restless  activity  of  mankind  striving  to  better  their  condi- 
tion, have  greatly  enlarged  the  field  of  human  enterprise,  and 
created  a  vast  number  of  new  industries,  which  give  scope  to 
ingenuity  and  employment  for  capital  and  labor.  The  laws  no 
longer  favor  the  granting  of  exclusive  privileges,  and  to  a  great 
extent  business  corporations  are  practically  partnerships,  and 
may  be  o-rganized  by  any  persons  who  desire  to  unite  their 
capital  or  skill  in  business,  leaving  a  free  field  to  all  others  who 
desire  for  the  same  or  similar  purposes  to  clothe  themselves 
with  a  corporate  character.  The  tendency  of  recent  adjudica- 
tions is  marked  in  the  direction  of  relaxing  the  rigor  of  the 
doctrine  that  all  contracts  in  general  restraint  of  trade  are  void, 
irrespective  of  special  circumstances.  Indeed,  it  has  of  late  been 
denied  that  a  hard  and  fast  rule  of  that  kind  has  ever  been  the 
law  of  England.  Rousillon  v.  Rousillon,  14  Ch.  Div.  351.  The 
law  has  for  centuries  permitted  contracts  in  partial  restraint  of 
trade,  when  reasonable ;  and  in  Homer  v.  Graves,  7  Bing.  735, 
Chief  Justice  Tindal  considered  a  true  test  to  be  "whether 
the  restraint  is  such  only  as  to  afford  a  fair  protection  to  the 
interests  of  the  party  in  favor  of  whom  it  is  given,  and  not  so 
large  as  to  interfere  with  the  interests  of  the  public."  AVhen 
the  restraint  is  general,  but  at  the  same  time  is  coextensive  only 
with  the  interest  to  be  protected,  and  with  the  benefit  meant  to 


60      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

be  conferred,  here  seems  to  be  no  good  reason  why,  as  between 
the  parties,  the  contract  is  not  as  reasonable  as  when  the  interest 
is  partial,  and  there  is  a  corresponding  partial  restraint.  And 
is  there  any  real  public  interest  which  necessarily  condemns  the 
one,  and  not  the  other  ?  It  is  an  encouragement  to  industry  and 
to  enterprise  in  building  up  a  trade,  that  a  man  shall  be  allowed 
to  sell  the  good-will  of  the  business  and  the  fruits  of  his  industry 
upon  the  best  terms  he  can  obtain.  If  his  business  extends  over 
a  continent,  does  public  policy  forbid  his  accompanying  the  sale 
with  a  stipulation  for  restraint  coextensive  with  the  business 
which  he  sells?  If  such  a  contract  is  permitted,  is  the  seller 
any  more  likely  to  beccwne  a  burden  on  the  public  than  a  man 
who,  having  built  up  a  local  trade  (mly,  sells  it,  binding  himself 
not  to  carry  it  on  in  the  locality?  Are  the  opportunities  for 
employment  and  for  the  exercise  of  useful  talents  so  shut  up 
and  hemmed  in  that  the  public  is  likely  to  lose  a  useful  member 
of  society  in  the  one  case,  and  not  in  the  other?  Indeed,  what 
public  policy  requires  is  often  a  vague  and  difficult  inquiry.  It 
is  clear  that  public  policy  and  the  interests  of  society  favor  the 
utmost  freedom  of  contract,  within  the  law,  and  require  that 
business  transactions  should  not  be  trammeled  by  unnecessary 
restrictions.  "If,"  said  Sir  George  Jessell  in  Printing  Co.  v. 
Sampson,  L.  R.  19  Eq.  462,  "there  is  one  thing  more  than  any 
other  which  public  policy  requires,  it  is  that  men  of  full  age  and 
competent  understanding  shall  have  the  utmost  liberty  of  con- 
tracting, and  that  contracts,  when  entered  into  freely  and  volun- 
tarily, shall  be  held  good,  and  shall  be  enforced  by  courts  of 
justice." 

It  has  sometimes  b^en  suggested  that  the  doctrine  that  con- 
tracts in  general  restraint  of  trade  are  void,  is  founded  in  part 
upon  the  policy  of  preventing  monopolies,  which  are  opposed  to 
the  liberty  of  the  subject,  and  the  granting  of  which  by  the  king 
under  claim  of  royal  prerogative  led  to  conflicts  memorable  in 
English  history.  But  covenants  of  the  character  of  the  one  now 
in  question  operate  simply  to  prevent  the  covenantor  from  en- 
gaging in  the  business  which  he  sells,  so  as  to  protect  the  pur- 
chaser in  the  enjoyment  of  what  he  has  purchased.  To  the 
extent  that  the  contract  prevents  the  vendor  from  carrying  on 
the  particular  trade,  it  deprives  the  community  of  any  benefit  it 
might  derive  from  his  entering  into  competition.    But  the  busi- 


THE  COMJMON  LAW  61 

iiess  is  open  to  all  others,  and  there  is  little  danger  that  the 
public  will  suffer  hann  from  lack  of  persons  to  engage  in  a 
profitable  industry.  Such  eoti tracts  do  not  create  monopolies. 
They  confer  no  special  or  exclusive  privilege.  If  contracts  in 
general  restraint  of  trade,  where  the  trade  is  general,  are  void 
as  tending  to  monopolies,  contracts  in  partial  restraint,  where 
the  trade  is  local,  are  subject  to  the  same  objection,  because  they 
deprive  the  local  community  of  the  services  of  the  covenantor 
in  the  particular  trade  or  callitig,  and  prevent  his  becoming  a 
competitor  with  the  covenantee.  We  are  not  aware  of  any  rule 
of  law  which  makes  the  motive  of  the  covenantee  the  test  of  the 
validity  of  such  a  contract.  On  the  contrary,  we  suppose  a 
party  may  legally  purchase  the  trade  and  business  of  another 
for  the  very  purpose  of  preventing  competition,  and  the  validity 
of  the  contract,  if  supported  by  a  consideration,  will  depend 
upon  its  reasonableness  as  between  the  parties.  Combinations 
between  producers  to  limit  production,  and  to  enhance  prices, 
are  or  may  be  unlawful,  but  they  stand  on  a  different  footing. 

We  cite  some  of  the  cases  showing  the  tendency  of  recent 
judicial  opinion  on  the  general  subject:  Whittaker  v.  Howe, 
3  Beav.  383;  Jones  v.  Lees,  1  Hurl.  &  N.  189;  Rousillon  v. 
Eousillon,  supra;  Leather  Co.  v.  Lorsont,  L.  R.  9  Eq.  345 ;  Col- 
lins V.  Locke,  4  App.  Cas.  674;  Steam  Co.  v.  Winsor,  20  Wall. 
64;  Morse,  etc.  Co.  v.  Morse,  103  Mass.  73.  In  Whittaker  v. 
Howe,  a  contract  made  by  a  solicitor  not  to  practice  as  a  solicitor 
"in  any  part  of  Great  Britain,"  was  held  valid.  In  Rousillon  v. 
Rousillon  a  general  contract  not  to  engage  in  the  sale  of  cham- 
pagne, without  limit  as  to  space,  was  enforced  as  being  under 
the  circumstances  a  reasonable  contract.  In  Jones  v.  Lees,  a 
covenant  by  the  defendant,  a  licensee  under  a  patent,  that  he 
would  not  during  the  license  make  or  sell  any  slubbing  machines 
without  the  invention  of  the  plaintiff  applied  to  them,  was  held 
valid.  Bramwell,  J.,  said:  "It  is  objected  that  the  restraint 
extends  to  all  England,  but  so  does  the  privilege."  In  Steam 
Co.  V.  Winsor  the  Court  enforced  a  covenant  by  the  defendant 
made  on  the  purchase  of  a  steamship,  that  it  should  not  be  run 
or  employed  in  the  freight  or  passenger  business  upon  any 
waters  in  the  state  of  California  for  the  period  of  10  years. 

In  the  present  state  of  the  authorities,  we  think  it  cannot  be 
said  that  the  early  doctrine  that  contracts  in  general  restraint 


l\ 


62      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  trade  are  void,  without  regard  to  circumstances,  has  been 
abrogat-ed.  But  it  is  manifest  that  it  has  been  much  weakened, 
and  that  the  foundation  upon  which  it  was  originally  placed  has, 
to  a  considerable  extent  at  least,  by  the  change  of  circumstances, 
been  removed.  The  covenant  in  the  present  case  is  partial,  and 
not  general.  It  is  ijrat'tically  unlimited  as  to  time,  but  this 
under  the  authorities  is  not  an  objection,  if  the  contract  is 
otherwise  good.  Ward  v.  Byrne,  5  Mees.  &  W.  548 ;  Mumford 
V.  Gething,  7  C.  B.  (N.  S.)  317.  It  is  limited  as  to  space  since 
it  excepts  the  state  of  Nevada  an'cTlHe  territoiy  of  JMontiuia 
from  its  operation,  and  therefore  is  a  partial,  and  not  a  general, 
restraint,  unless,  as  claimed  by  the  defendant,  the  fact  that  the 
covenant  applies  to  the  whole  of  the  state  of  New  York  consti- 
tutes a  general  restraint  within  the  authorities.  In  Chappel  v. 
Brockway,  supra,  Bronson,  J.,  in  stating  the  general  doctrine 
as  to  contracts  in  restraint  of  trade,  remarked  that  "contracts 
which  go  to  the  total  restraint  of  trade,  as  that  a  man  will  not 
pursue  his  occupation  anywhere  in  the  state,  are  void."  The 
contract  under  consideration  in  that  case  was  one  by  which  the 
defendant  agreed  not  to  run  or  be  interested  in  a  line  of  packet- 
boats  on  the  canal  between  Rochester  and  Buffalo.  The  atten- 
tion of  the  Court  was  not  called  to  the  point  whether  a  contract 
was  partial,  which  related  to  a  business  extending  over  the  whole 
country,  and  which  restrained  the  carrying  on  of  business  in 
the  state  of  New  York,  but  excepted  other  states  from  its  opera- 
tion. The  remark  relied  upon  was  obiter,  and  in  reason  cannot 
be  considered  a  decision  upon  the  point  suggested.  We  are  of 
the  opinion  that  the  contention  of  the  defendant  is  not  sound  in 
principle,  and  should  not  be  sustained.  The  boundaries  of  the 
states  are  not  those  of  trade  and  commerce,  and  business  lis 
restrained  within  no  such  limit.  The  country  as  a  whole  is  that 
of  which  we  are  citizens,  and  our  duty  and  allegiance  are  due 
both  to  the  state  and  nation.  Nor  is  it  true  as  a  general  rule 
that  a  business  established  here  cannot  extend  beyond  the  state, 
or  that  it  may  not  be  successfully  established  outside  of  the 
state.  There  are  trades  and  employments  which  from  their 
nature  are  localized,  but  this  is  not  true  of  manufacturing  in- 
dustries in  general.  We  are  unwilling  to  say  that  the  doctrine 
as  to  what  is  a  general  restraint  of  trade  depends  upon  state 
lines,  and  we  cannot  say  that  the  exception  of  Nevada  and  Mon- 


THE  COMMON  LAW  63 

tana  was  colorable  merely.  The  rule  itself  is  arbitrary,  and  we 
are  not  disposed  to  put  such  a  construction  upon  this  contract 
as  will  make  it  a  contract  in  general  restraint  of  trade,  when 
upon  its  face  it  is  only  partial.  The  case  of  Steam  Co,  v.  "Win- 
sor,  supra,  supports  the  view  that  a  restraint  is  not  necessarily 
general  which  embraces  an  entire  state.  In  this  case  the  de- 
fendant entered  into  the  covenant  as  a  consideration  in  part  of 
the  purchase  of  his  property  by  the  Swift  &  Courtney  &  Beecher 
Company,  presumably  because  he  cansidered  it  for  his  advantage 
to  make  tlie  sale.  He  realized  a  large  sum  in  money,  and  on  the 
completion  of  the  transaction  became  interested  as  a  stockholder 
in  the  very  business  which  he  had  sold.  We  are  of  opinion  that  : 
the  covenant,  being  supported  by  a  good  consideration,  and  con-  i 
stituting  a  partial  and  not  a  general  restraint,  and  being,  in; 
view  of  the  circumstances  disclosed,  reasonable,  is  valid  and  not 
void. 

In  respect  to  the  second  general  question  raised,  we  are  of 
opinion  that  the  equitable  jurisdiction  of  the  court  to  enforce  the 
covenant  by  injunction  was  not  excluded  by  the  fact  that  the 
defendant,  in  connection  with  the  covenant,  executed  a  bond 
for  its  performance,  with  'a  stipulation  for  liquidated  dam- 
ages. It  is  of  course  competent  for  parties  to  a  covenant  to 
agree  that  a  fixed  sum  shall  be  paid  in  case  of  a  breach  by  the 
party  in  default,  and  that  this  should  be  the  exclusive  remedy. 
The  intention  in  that  ease  would  be  manifest  that  the  payment 
of  the  penalty  should  be  the  price  of  non-performance,  and  to 
be  accepted  by  the  covenantee  in  lieu  of  performance.  Insur- 
ance Co.  V.  Insurance  Co.,  87  N.  Y.  405.  But  the  taking  of  a 
bond  in  connection  with  a  covenant  does  not  exclude  the  juris- 
diction of  equity  in  a  case  otherwise  cognizable  therein,  and  the 
fact  that  the  damages  in  the  bond  are  liquidated  does  not  change 
the  rule.  It  is  a  question  of  intention,  to  be  deduced  from  the 
whole  instrument  and  the  circumstances;  and  if  it  appear  that 
the  performance  of  the  covenant  was  intended,  and  not  merely 
the  payment  of  damages  in  case  of  a  breach,  the  covenant  will 
be  enforced.  It  was  said  in  Long  v.  Bowring,  33  Beav.  585, 
which  was  an  action  in  equity  for  the  specific  performance  of 
a  covenant,  with  a  claim  for  liquidated  damages:  "All  that  is 
settled  by  this  claim  is  that  if  they  bring  an  action  for  damages, 
the  amount  to  be  recovered  is  1,000  pounds,  neither  more  nor 


64      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

less."  There  can  be  no  doubt  upon  the  circumstances  in  this 
case  that  the  parties  intended  tJiat  the  covenant  should  be  per- 
formed, and  not  that  the  defendant  might  at  his  option  repur- 
chase his  right  to  manufacture  and  sell  matches  on  payment  of 
$15,000,  the  liquidated  damages.  The  right  to  relief  by  injunc- 
tion in  similar  contracts  is  established  by  numerous  cases.  In- 
surance Co.  V.  Insurance  Co.,  supra;  Long  v.  Bowring,  s^ipra; 
Howard  v.  Woodward,  10  Jur.  (N.  S.)  1123;  Coles  v.  Sims,  5 
De  Gex,  M.  &  G.  1 ;  Avery  v.  Langford,  Kay,  663 ;  Whittaker  v. 
Howe,  supra;  Hubbard  v.  Miller,  27  Mich.  15. 

There  are  some  subordinate  questions  which  will  be  briefly 
noticed : 

First.  The  plaintiff,  as  successor  of  the  Swift  &  Courtney  & 
Beecher  Company,  and  as  ass-ignee  of  the  covenant,  can  maintain 
the  action.  The  obligation  runs  to  the  Swift  &  Courtney  & 
Beecher  Company,  "its  successors  and  assigns."  The  covenant 
was  in  the  nature  of  a  property  right,  and  was  assignable;  at 
least,  it  was  assignable  in  connection  with  a  sale  of  the  property 
and  business  of  the  assignees.  Hedge  v.  Lowe,  47  Iowa,  137, 
and  cases  cited. 

Second.  The  defendant  is  not  in  a  position  which  entitles 
him  to  raise  the  question  that  the  contract  with  the  Swift  & 
Courtney  &  Beecher  Company  was  idtra  vires  of  that  corpora- 
tion. He  has  retained  the  benefit  of  the  contract,  and  must 
abide  by  its  terms.    Arms  Co.  v.  Barlow,  68  N.  Y.  34. 

Third.  The  fact  that  the  plaintiff  is  a  foreign  corporation  is 
no  objection  to  its  maintaining  the  action.  It  would  be  repug- 
nant to  the  policy  of  our  legislation,  and  a  violation  of  the  rules 
of  comity,  to  grant  or  withhold  relief  in  our  courts  upon  such 
a  discrimination.  Merrick  v.  Van  Santvoord,  34  N.  Y.  208 ; 
Bank  v.  Lacombe,  84  N.  Y.  367 ;  Code  Civil  Proc.  §  1779. 

Fourth.  The  consent  of  the  Swift  &  Courtney  &  Beecher 
Company  to  the  purchase  by  the  defendant  of  the  business  of 
Brueggemann  did  not  relieve  the  defendant  from  his  covenant. 
That  transaction  was  in  no  way  inconsistent  therewith.  Brueg- 
gemann was  selling  matches  manufactured  by  the  company, 
under  an  agreement  to  deal  in  them  exclusively. 

There  are  some  questions  on  exceptions  to  the  admission  and 
exclusion  of  evidence.  None  of  them,  we  think,  present  any 
question  requiring  a  reverse  of  the  judgment. 


THE  COMMON  LAW  65 


We  think  there  is  no  error  disclosed  by  the  record,  and  the 
judgment  should  therefore  be  affirmed.  ^    j,     [- 

All  concur,  except  Peckham,  J.,  dissenting.  J    v^*^  /^         ^'^ 


^'    v^jiJ^ 


LESLIE  V.  LORILLARD  ^>^'    <^^\.>'^   t^ 


(Court  of  Appeal  of  New  York,  1888.    110  N.  Y.  519.) 
Appeal  from  Supreme  Court,  general  term,  Second  depart-l^vf^ 


ment.  ^^    T 

Demurrer   to   complaint   by    defendants   Lorillard   and   the       ,   ^J^ 
Lorillard  Steamship  Company.  *'^  ' 

The   plaintiff   is    a  stockholder   of   the   defendant,    the   Old  ,^  ^k**-*^ 
Dominion  Steamship  Company  of  Delaware.     In  the  year  1873  ,,^*' 

the  Old  Dominion  Steamship  Company  of  New  York  was  a  oor-  ^^'"^^ 
poration  organized  under  the  la\w8  of  New  York,  and  was  en-  *^ 
gaged  in  the  business  of  running  a  line  of  steamships  between  %^  * ' 
the  port  of  New  York  and  certain  ports  in  the  state  of  Virginia. /^^     ^ 
The  defendant,  the  Lorillard  Steamship  Company,  was  also  a    ^tjX^it 
New  York  corporation,  organized  for  the  business  of  navigating 
the  ocean  by  steamships.    The  defendant  Lorillard  was  a  director   to    ^'*-**' 
and  the  president  of  the  Lorillard  company,  and  had  entire 
control  of  it ;  the  other  directors-,  except  one,  who  was  a  brother- 
in-law,  being  his  clerks  and  employees.     The  complaint  charges 
that  in  and  prior  to  the  summer  of  1873  said  Lorillard,  ' '  for  the 
purpose  of  extorting  large  suras  of  money  from  the  Old  Domin- 
ion Steamship  Company  of  New  York,  stated  to.  the  officers  of 
said  corporation  that  the  said  Lorillard  Steamship  Company  in- 
tended to  put  on  and  run  a  line  of  steamsliips  between  the  ports 
above  mentioned,  in  opposition  to  the  steamships  of  said  Old 
Dominion  Steamship  Company;  and,  to  deceive  the  officers  of 
said  company,  and  cause  them  to  believe  that  a  formidable  oppo- 
sition would  be  established  against  said  company,  said  Lorillard 
caused  said  Lorillard   Steamship    Company  to  lease   docks  at 
Norfolk  and  other  places,  and  to  hire  agents  and  servants  at 
different  points,  and,  in  or  about  the  month  of  October,  1873, 
said   Lorillard   caused   said   Lorillard   Steamship   Company   to 
put  on  and  run  a  line  of  steamships  between  said  ports  in  opposi- 
tion to  said  Old  Dominion  Steamship  Company  of  New  York;" 

Kales  B.  of  T.  Vol.  1—5 


66      COIMBINATIONS  AND  RESTRAINT  OP  TRADE 

that  said  Lorillard  continued  to  run  his  steamships  at  great  loss, 
and  at  his  own  expense,  until  his  efforts  were  successful  in 
deceiving  the  officers  of  the  Old  Dominion  Company  into  the 
belief  that  a  powerful  opposition  line  had  been  established ;  and 
in  January,  1874,  an  agreement  running  between  the  Old 
Dominion  Company  and  Lorillard  and  his  company  was  signed 
by  the  president  of  each  company,  and  by  Lorillard  for  him- 
self, by  the  terms  of  which,  in  consideration  of  a  monthly  pay- 
ment to  him,  Lorillard  and  his  company  agreed  to  discontinue 
running  their  vessels,  or  any  others,  between  the  ports  men- 
tioned; and  that  they  would  not  charter  or  sell  the  vessels  to 
any  other  company  or  persons  to  be  used  on  that  route,  and 
would  not  become  in  any  way  interested  in  the  running  of 
steamships  between  those  places;  that  in  February,  1875,  the 
defendant,  the  Old  Dominion  Steamship  Company  of  Delaware, 
was  formed  under  the  laws  of  that  state,  and  succeeded  to  the 
business  of  the  New  York  company,  and  "became  vested  with 
the  property  of  said  last-named  company,  which  was  duly  con- 
veyed and  assigned  to  it,  and  subjected  to  the  liabilities  and 
contracts  of  said  company;"  that  this  new  company  continued 
making  payments  to  Lorillard  under  the  contract  mentioned 
until  February,  1878,  when  disputes  arose  between  the  various 
parties,  and  a  new  contract  was  entered  into  in  October,  1878 ; 
that  by  this  latter  contract  the  previous  contract  was  canceled, 
and,  in  consideration  of  tlie  payment  of  a  gross  sum  of  money, 
and  of  certain  monthly  payments,  to  be  continued  through  five 
years  from  February,  1879,  Lorillard  and  his  company  again 
agreed  not  to  run  or  to  be  in  any  way  interested  in  the  running 
of  steamships  between  the  ports  named ;  that  the  Delaware  Com- 
pany made  all  the  payments  called  for  under  the  second  agree- 
ment up  to  August,  1881,  when  further  payment  of  the  monthly 
subsidies  was  enjoined  in  an  action  brought  by  this  plaintiff. 
Plaintiff  alleges  that  prior  to  the  commencement  of  this  action, 
and  in  February,  1884,  he  requested  the  Delaware  Steamship 
Company  to  pay  no  more  moneys,  and  to  commence  an  action  for 
the  cancellation  of  the  contract,  and  for  the  recovery  back  of  the 
moneys  paid  under  the  contracts.  This  demand  was  in  a  letter, 
and  the  reply  to  it  contains  a  resolution  of  the  board  of  directors 
refusing  to  take  the  action  requested.  Plaintiff  also  alleges  the 
commencement  of  an  action  in  February,   1884,   by  Lorillard 


THE  COMMON  LAW  67 

against  the  Delaware  Company  to  recover  the  monthly  pay- 
ments payable  under  the  contract  from  and  after  August,  1881, 
and  that  the  Delaware  Company  did  not  intend  to  defend  it. 

The  relief  demanded  is  an  injunction  against  the  Delaware 
Company's  making  any  payments  under  the  contract,  against 
Lorillard  from  prosecuting  his  action,  the  cancellation  of  the 
contract,  and  the  re-payment  by  Lorillard  of  all  moneys  received. 

The  demurrer  having  been  overruled  at  special  term,  and  its 
decision  having  been  aflSrmed  at  general  term,  defendants  Loril- 
lard and  the  Lorillard  Steamship  Company  appealed  to  this 
court. 

GRAY,  J.  The  defendants  Lorillard  and  the  Lorillard  Steam- 
ship Company  have  demurred  to  the  complaint  on  the  ground 
that  it  did  not  state  facts  sufficient  to  constitute  a  cause  of  action. 
We  are  thus  required  to  examine  this  pleading,  and  to  see 
whether,  allowing  to  its  averments  all  the  force  and  truth  such 
a  ground  of  demurrer  concedes,  it  may  be  sustained  as  the 
foundation  of  an  action  for  equitable  relief. 

Our  decision  of  the  question  will  necessarily  turn  upon  the 
validity  of  the  contracts  which  are  set  forth.  An  extended 
discussion  of  the  principles  controlling  the  making  and  enforce- 
ment of  corporate  contracts  is  unnecessary.  By  frequent  adju- 
dications certain  principles  are  well  settled,  and  have  become 
familiar. 

The  contracts  of  corporations  are  said  to  be  ultra  vires  when 
they  involve  some  adventure  or  undertaking,  not  within  the 
scope  of  their  charter,  which  is  their  rule  of  corporate  action. 
In  the  granting  of  charters  the  legislature  is  presumed  to  have 
had  in  view  the  public  interest,  and  public  policy  is  (as  the 
interest  of  stockholders  ought  to  be)  concerned  in  the  restriction 
of  corporations  within  chartered  limits,  and  a  departure  there- 
from is  only  deemed  excusable  when  it  cannot  result  in  prejudice 
to  the  public  or  to  the  stockholders.  As  artificial  creations  they 
have  no  powers  or  faculties,  except  those  with  which  they  were 
endowed  when  created ;  and  when,  as  is  frequently  the  case, 
they  act  in  excess  of  their  powers,  the  question  will  be,  is  the 
act  prohibited  as  prejudicial  to  some  public  interest,  or  is  it  an 
act,  not  unlawful  in  that  sense,  but  prejudicial  to  the  stock- 
holders?    The  rule,  however,  is  well  settled  that  the  plea  of 


68      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ultra  vires  should  not  prevail  when  it  would  not  advance  justice, 
but,  on  the  contrary,  would  accomplish  legal  wrong. 

In  suits  between  the  corporation  and  strangers  dealing  with 
it  the  question  is  whether  the  act  is  one  the  corporation  is  not 
authorized  to  perform  under  any  circumstances;  or  one  that  it 
may  perform  for  some  purposes,  or  under  certain  conditions. 
In  the  first  case  it  is  ultra  vires,  and  there  can  be  no  recovery, 
because  the  party  dealing  with  the  corporation  is  bound  to 
know  from  the  law  of  its  existence  that  it  has  no  power  to  per- 
form it.  In  the  second  case  the  issue  will  turn  upon  whether  the 
party  dealing  with  it  is  aware  of  the  intention  to  perform  the 
act  for  some  unauthorized  purpose,  or  whether  the  attendant 
circumstances  justify  its  making  and  its  performance.  In  ac- 
tions by  stockholders,  which  assail  the  acts  of  their  directors  or 
trustees,  courts  will  not  interfere  unless  the  powers  have  been 
illegally  or  unconscientiously  executed ;  Or  unless  it  be  made  to 
appear  that  the  acts  were  fraudulent  or  collusive,  and  destructive 
of  the  rights  of  the  stockholders.  Mere  errors  of  judgment  are 
not  sufficient  as  grounds  for  equity  interference,  for  the  powers 
of  those  intrusted  with  corporate  management  are  largely  dis- 
cretionary. 

Testing  by  these  rules  the  case  made  by  plaintiff  in  his  com- 
plaint, in  approaching  the  consideration  of  that  pleading,  we 
find  that  the  only  respect  in  which  the  contracts  in  question 
could  be  viewed  as  prejudicial  to  public  interests,  and  therefore 
become  the  subject  of  judicial  condemnation  as  against  public 
policy,  would  be  that  they  were  in  restraint  of  competition,  and 
tended  to  create  a  monopoly.  The  tendency  of  modern  thought 
and  of  the  decisions,  however,  has  been  no  longer  to  uphold  in 
its  strictness  the  doctrine  which  formerly  prevailed  in  respect 
of  agreements  in  restraint  of  trade.  The  severity  with  which 
such  agreements  were  at  first  treated  became  more  and  more 
relaxed  by  exceptions  and  qualifications.  This  change  was 
gradual,  and  may  be  considered,  perhaps,  as  due  mainly  to  the 
growth  and  spread  of  the  industrial  activities  of  the  world,  and 
to  enlarged  commercial  facilities,  which  render  such  agreements 
less  dangerous  as  tending  to  create  monopolies.  The  earlier 
doctrine,  of  course,  obtained  in  respect  of  agreements  between 
individuals.  The  limitation  which  became  imposed  was  that 
the  agreement  should  operate  as  to  a  locality  and  not  as  to  the 


THE  COMMON  LAW  69 

whole  land.  In  later  times  the  danger  in  such  agreements  seems 
only  really  to  exist  when  corporations  are  parties  to  them;  for 
their  means  and  strength  would  better  enable  them  to  buy  off 
rivalry,  and  to  create  monopolies. 

The  object  of  government,  as  interpreted  by  the  judges,  was 
not  to  interfere  with  the  free  right  of  man  to  dispose  of  his 
property  or  of  his  labor;  it  was  to  guard  society,  of  which  he 
was  a  member,  from  the  injurious  consequences  of  his  agree- 
ment, whether  they  would  arise  from  his  own  improvidence  in 
bargaining  away  his  means  of  gaining  a  livelihood,  or  in  the 
deprivation  to  society  of  the  advantages  of  competition  in  skilled 
labor.  At  the  present  day  there  is  not  that  danger,  or  at  least 
it  does  not  seem  to  exist  to  an  appreciable  extent,  except,  pos- 
sibly, as  suggested,  in  the  ease  of  corporations.  In  their  super- 
vision and  in  their  restriction  within  the  limits  of  their  chartered 
powers  the  government  and  the  public  are  directly  interested. 
Corporations  are  great  engines  for  the  promotion  of  the  public 
convenience,  and  for  the  development  of  public  wealth,  and  so 
long  as  they  are  conducted  for  the  purposes  for  which  organized 
they  are  a  public  benefit ;  but  if  allowed  to  enga-ge  without  super- 
vision, in  subjects  of  enterprise  foreign  to  their  charters,  or  if 
permitted  unrestrainedly  to  control  and  monopolize  the  ave- 
nues to  that  industry  in  which  they  are  engaged,  they  become 
a  public  menace,  against  which  public  policy  and  statutes  design 
protection. 

Where,  therefore,  the  provisions  of  agreements  in  restraint 
of  competition  tend  beyond  measures  for  self-protection,  and 
threaten  the  public  good  in  a  distinctly  appreciable  manner, 
they  should  not  be  sustained.  The  apprehension  of  danger  to 
the  public  interests,  however,  should  rest  on  evident  grounds, 
and  courts  should  refrain  from  the  exercise  of  their  equitable 
powers  in  interfering  with  and  restraining  the  conduct  of  the 
affairs  of  individuals  or  of  corporations,  unless  their  conduct, 
in  some  tangible  form,  threatens  the  welfare  of  the  public.  The 
doctrine  relating  to  contracts  in  restraint  of  trade  has  been 
elaborately  discussed  in  a  careful  opinion  of  Andrews,  J.,  in 
the  recent  case  of  Match  Co.  v.  Roeber,  106  N.  Y.  473.  Under 
the  authority  of  that  case  it  may  be  said  that  no  contracts  are 
void,  as  being  in  general  restraint  of  trade,  where  they  operate 
simply  to  prevent  a  party  from  engaging  or  competing  in  the 


70      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

same  business.  It  is  there  said  (106  N.  Y.  483)  :  "To  the  ex- 
tent that  the  contract  prevents  the  vendor  from  carrying  on 
the  particular  trade,  it  deprives  the  community  of  any  benefit 
it  might  derive  from  his  entering  into  competition.  But  the 
business  is  open  to  all  others,  and  there  is  little  danger  that  the 
public  will  suffer  harm  from  lack  of  persons  to  engage  in  a 
profit-able  industry.  Such  contracts  do  not  create  monopolies. 
They  confer  no  special  or  exclusive  privileges." 

Under  the  doctrine  of  that  case  it  is  difficult  to  see  how  these 
contracts  which  are  complained  of  here  are  open  to  the  objection 
suggested  by  counsel.  Regarded  only  in  the  light  of  what  they 
tended  to  effect,  these  agreements  removed  a  business  rival, 
whose  competition  may  have  been  deemed  dangerous  to  the 
success  or  maintenance  of  the  business  of  the  Old  Dominion 
Company.  They  could  not,  of  course,  exclude  all  competition 
in  the  business,  but  could  in  that  particular  case. 

How,  then,  is  the  result  different  from  the  simpler  case  of 
the  sale  by  an  individual  of  his  business  and  his  right  to  conduct 
it  in  a  particular  part  of  the  land.     The  doctrine  held  by  this 
Court  in  Match  Co.  v.  Roeber,  supra,  should  control  in  the  case 
at  bar,  and  these  contracts,  therefore,  cannot  be  considered  ob- 
jectionable  on   the    ground    that   they   restrained    competition. 
Whether  competition   in  this  particular  business   would  be   a 
public  benefaction,  or  its  restraint  a  source  of  prejudice,  we 
;^"    ^       are  unable,  of  course,  to  judge.    I  do  not  think  that  competition 
j*\    I  is  invariably  a  public  benefaction,  for  it  may  be  carried  on  to 
\      j    such  a  degree  as  to  become  a  general  evil. 
^'^  The  conclusion  at  which  we  have  arrived  as  to  these  contracts 

would  seem  to  dispose  of  this  case,  and  make  further  considera- 
tion useless,  for  the  plaintiff  makes  them  the  basis  of  his  action. 
The  relief  he  has  sought  is  the  prevention  of  a  misappropriation 
of  corporate  funds  by  the  officers  of  the  company,  and  the 
annulment  of  these  contracts  as  obtained  by  deception. 

We  do  not  question  the  undoubted  right  of  stockholders  to 
complain  of  any  diversion  of  the  capital  and  assets  to  purposes 
not  authorized  by  the  charter,  and  to  arrest  by  suit  an  un- 
authorized course  of  dealing  which  results  in  such  diversion. 
The  powers  of  a  court  of  equity  may  be  put  in  motion  at  the 
instance  of  a  single  stockholder,  if  he  can  show  that  the  corpora- 
tion are  employing  their  statutory  powers  for  the  accomplish- 


THE  COMMON  LAW  71 

ment  of  purposes  not  within  the  scope  of  their  institution.  Aug. 
&  A.  Corp.  §  393.  But  this  is  not  such  a  case.  The  contracts 
were  within  the  power  of  the  corporation  to  make,  and  if  they 
were  free  from  the  taint  of  fraud,  and  were  not  procured  to  be 
made  by  some  collusion  or  conspiracy,  then  they  are  binding 
upon  the  company,  and  constitute  an  obligation  which  the  offi- 
cers must  discharge.  If  this  is  a  controversy  between  a  stock- 
holder and  directors  or  other  shareholders,  who  may  be  acting 
distinctively  towards  the  property  in  which  he  has  an  interest, 
it  is  one  with  which  these  defendants  are  not  concerned,  and 
into  which  they  should  not  be  brought.  They  dealt  with  the 
directors,  in  respect  of  matt-ers  which  were  within  the  dis- 
cretionary powers  of  a  board  of  management.  If  it  were 
charged  that  some  fraud  was  practiced  by  Lorillard,  to  which 
the  officers  of  the  New  York  Company  were  parties,  and  that 
they  had  colluded  with  him,  the  equitable  jurisdiction  of  the 
Court  might  be  invoked  by  the  plaintiff;  for  fraud  vitiates  all 
contracts,  and  it  is  a  general  rule  that  in  cases  of  fraud,  or 
where  the  charge  is  of  conspiracy  or  of  a  fraudulent  combina- 
tion, equity  has  concurrent  jurisdiction  with  the  law,  and  will 
give  redress. 

But  in  every  case  the  exercise  of  jurisdiction  in  equity  rests 
in  the  sound  discretion  of  the  Court,  and  depends  upon  the 
special  circumstances  disclosed.  McHenry  v.  Hazard,  45  N.  Y. 
580;  Dodge  v.  Woolsey,  18  How.  331.  In  Hawes  v.  Oak- 
land, 104  U.  S.  450,  Miller,  J.,  asserted  the  doctrine  estab- 
lished in  the  case  of  Dodge  v.  Woolsey  to  be  that,  to  enable  a 
stockholder  in  a  corporation  to  sustain  in  a  court  of  equity,  in 
his  own  name,  a  suit  founded  on  a  right  of  action  existing  in 
the  corporation  itself,  there  must  exist  as  a  foundation  for  the 
suit,  "some  action  or  threatened  action  of  the  managing  board 
of  directors  or  trustees  of  the  corporation,  which  is  beyond  the 
authority  conferred  on  them  by  their  charter  or  other  source 
of  organization;  or  such  a  fraudulent  transaction,  completed 
or  contemplated  by  the  acting  managers,  in  connection  with 
some  other  party,  or  among  themselves,  or  with  other  share- 
holders, as  will  result  in  serious  injury  to  the  corporation,  or 
to  the  interests  of  the  other  shareholders;  or  where  the  board 
of  directors,  or  a  majority  of  them,  are  acting  for  their  own 
interest  in  a  manner  destructive  of  the  corporation  itself,  or  of 


72      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  rights  of  the  other  shareholders."    We  concur  in  the  adop- 
tion of  these  principles  for  application  to  such  actions. 

But  it  is  not  made  to  appear  here  tliat  there  was  any  collusion 
between  the  officer  of  the  New  York  Company  and  these  de- 
fendants ;  and  as  to  tlie  second  contract,  which  was  made  between 
these  defendants  and  the  Delaware  Company,  of  which  plaintiff 
was  a  stockholder,  there  is  no  allegation  whatever  of  any  decep- 
tion or  collusion.  We  think  that,  as  these  contracts  were  not 
ultra  vires,  or  assailable  on  grounds  of  public  policy,  that  they 
were  such  as  came  within  the  discretionary  powers  of  the  board 
of  management  to  make  in  the  interests  of  the  corporation. 
Within  tlie  limits  of  the  chartered  authority  the  officers  of  a 
corporation  have  the  fullest  power  to  regulate  the  concerns  of 
the  company  according  to  their  best  judgment.  It  is  true  that 
the  powers  conferred  upon  its  agents  by  the  charter  of  a  cor- 
poration cannot  be  transcended  by  any  considerations  of 
expediency  which  they  suppose  may  result  to  the  stockholders 
from  an  act  not  within  the  scope  of  their  authority  [McCullough 
V.  Moss,  5  Denio,  567]  ;  but  these  contracts  were  such  as  the 
corporation  could  legitimately  make,  and  consequently  came 
within  the  scope  of  the  ordinary  powers  of  corporate  manage- 
ment. 

The  conclusions  at  which  we  have  arrived  render  further 
discussion  of  the  questions  in  this  record  unnecessary. 

The  interlocutory  judgment  overruling  the  demurrer  should 
be  reversed,  the  demurrer  sustained;  and  the  complaint  dis- 
missed, with  costs. 

All  concur,  except  Ruger^  C.  J.,  not  voting. 


WOOD  V.  WHITEHEAD  BROS.   CO. 

(Court  of  Appeals  of  New  York,  1901.     165  N.  Y.  545.) 

This  action  was  brought  to  recover  a  sum  claimed  to  be  due 
to  the  plaintiff  under  a  contract  made  orally  with  the  defendant 
in  May,  1895,  by  the  terms  of  which  the  latter  had  agreed  to 
pay  to  the  former  $30  each  month  while  he  lived  and  while  it 
remained  a  corporation,  in  consideration  of  his  agreement  to 
give  up  the  business  of  dealing  in  molding  sand  obtained  from 


THE  COMMON  LAW  73 

sandbanks  in  the  county  of  Albany,  and  not  to  engage  further 
in  it  personall}^  or  as  agent  for  any  other  than  the  defendant. 
Both  parties  were,  and  had  been  for  some  years  before,  en- 
gaged in  the  business  of  dealing  in  molding  sand.  The  $30 
were  paid  monthly  to  the  plaintiff  until  the  end  of  the  succeed- 
ing year,  when  further  payments  were  refused,  and  subsequently 
the  present  action  was  brought  to  recover  the  amount  remaining 
unpaid  at  the  time  of  the  bringing  thereof.  Prior  to  the  making 
of  the  contract,  and  in  the  month  of  April,  1893,  the  plaintiff 
had  executed  and  delivered  to  the  defendant  a  writing  of  which 
the  following  is  a  copy: 

"Albany,  N.  Y.,  April  15,  1893. 

"Received  this  day  of  Whitehead  Bros.  Company  the  sum  of 
two  hundred  and  fifty  dollars,  the  receipt  of  which  is  herebj'- 
acknowledged,  the  same  being  payment  in  full  for  all  debts, 
dues,  demands,  services,  and  all  or  any  obligations  whatsoever; 
and  I  hereby  agree  to  render  to  said  company  my  services  in 
selling  molding  sand  for  them,  and  in  any  other  way  or  manner 
they  may  require;  and  I  further  agree  not  to  allow  any  other 
person  to  use  my  name  in  the  purchase  of,  or  the  sale  of, 
molding  sand,  from  this  date  on.  I  hereby  agree  to  accept  from 
this  date  from  the  said  Whitehead  Bros.  Co.,  in  full  compen- 
sation for  the  services  as  described  above,  the  sum  of  fifteen 
dollars  per  month,  the  same  to  terminate  whenever  said  com- 
pany give  me  thirty  days'  notice  that  they  no  longer  require 
my  services.  [Signed]  Harvey  Wood.  Witness:  P.  J.  Rora- 
beck." 

Thereafter  the  defendant  paid  to  the  plaintiff  $15  a  month, 
until  about  two  months  before  May,  1895,  the  time  when  the 
contract  now  sued  upon  was  made.  The  trial  judge,  before 
whom  the  trial  was  had  without  jury,  made  findings  of  fact, 
which  included  the  facts  stated;  and  he  found,  further,  that 
when  the  defendant  ceased  paying  the  $15  a  month  under  the 
agreement  of  1893,  it  had  not  required  of  the  plaintiff  any 
services  whatever,  nor  did  the  plaintiff  tender  any  services,  or 
demand  any  payment  under  that  agreement,  and  that  both 
parties  had  treated  the  same. as  at  an  end,  although  no  notice 
as  provided  in  the  writing  was  ever  given.  As  conclusions  of  law, 
he  found  that  the  agreement  of  1893  was  not  supported  by 


74      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

mutual  promises,  but,  if  valid  and  enforceable  because  acted 
upon,  it  was  abandoned  by  both  parties;  that  there  was  a 
sufficient  consideration  for  the  contract  of  May,  1895 ;  that  that 
agreement  was  not  void  as  being  in  restraint  of  trade ;  and  that 
the  plaintiff  was  entitled  to  recover.  The  plaintiff's  judgment 
was  affirmed  at  the  appellate  division,  in  the  Third  department, 
and  the  defendant  appealed  to  this  court. 

GRAY,  J.  (after  stating  the  facts).  The  appellant  has  raised 
two  questions  with  respect  to  the  validity  of  the  contract  sued 
upon.  In  the  first  place,  it  is  contended  that  it  was  wholly 
without  any  consideration,  for  the  reason  that  when  it  was 
made  there  was  in  force  a  prior  contract,  made  in  1893,  which 
required  the  plaintiff  to  do  every  act  and  thing  required  of 
him  by  the  contract  of  1895,  invoking  a  familiar  principle  in 
the  law  of  contracts.  Vanderbilt  v.  Schreyer,  91  N.  Y.  392,  401. 
I  think  that  there  are  two  answers  to  this.  The  writing  of 
1893  was  of  a  twofold  nature.  It  was  in  part  an  acknowledg- 
ment by  the  plaintiff  of  the  receipt  of  the  sum  of  $250  as 
payment  in  full  for  all  debts,  services,  demands,  etc.,  and  it 
was  in  part  an  agreement  bj^  the  plaintiff  to  render  to  the 
defendant  his  "services  in  selling  molding  sand  for  them," 
and  "not  to  allow  any  other  person  to  use  his  name  in  the 
purchase  or  the  sale  of  molding  sand."  The  payment  of  $250 
would  not  appear  to  be  the  consideration  for  the  agreement  by 
the  plaintiff  to  render  future  services,  but  rather  to  be  simply 
the  receipt  or  acknowledgment  of  payment  of  something  which 
was  then  due  the  plaintiff.  The  further  statement  as  to  com- 
pensation for  those  services  confirms  this  interpretation,  and 
it  is,  in  fact,  borne  out  by  the  plaintiff's  evidence  that  the  $250 
was  paid  him  at  the  time  on  an  old  contract.  But,  if  we  could 
assume  that  it  was  the  consideration  for  the  plaintiff's  agree- 
ment to  render  the  future  services,  still  I  think  it  is  clear  that 
that  agreement  was  essentially  other  than  the  contract  which 
the  parties  made  in  1895.  The  plaintiff,  by  his  agreement  of 
1893,  was  to  serve  the  defendant  in  selling  molding  sand  for  it 
and  in  any  other  way  it  might  require.  He  agreed  to  become  its 
agent,  and  his  agreement  did  not  compel  him  to  cease  dealing 
in  the  sand  for  his  own  account.  But,  by  the  subsequent  con- 
tract of  1895,  such  an  obligation  to  cease  the  business  of  deal- 


THE  COMMON  LAW  75 

iiig  in  Albany  molding  sand  was  imposed  upon  and  assumed 
by  him.  Then,  further,  I  do  not  think  that  the  finding  of  fact 
that  tlie  agreement  of  1893  was  treated  by  the  parties  as  at  an 
end  is  without  support  in  the  evidence.  The  trial  judge  could 
reasonably  infer  from  the  facts  testified  to  that  the  defendant 
had  stopped  paying  to  the  plaintiff  the  $15  a  month  for  some 
two  months  before  the  agreement  of  1895,  and  that  the  plaintiff 
thereupon  had  resumed  his  dealings  in  sand  until  the  contract 
of  1895  was  made ;  that  the  parties  regarded  their  arrangement 
as  terminated,  and  had  abandoned  it. 

I  think,  therefore,  that  the  contract  of  1895,  which  is  found 
to  have  been  made  by  the  parties  and  carried  into  execution, 
was  valid  and  enforceable,  unless,  as  it  is,  in  the  second  place, 
contended  by  the  appellant,  it  was  against  public  policy,  as 
being  in  restraint  of  trade,  and  therefore  void.  The  argument 
in  that  respect  seems  to  be  that  the  contract  was  the  plaintiff's 
covenant  not  to  do  ])usiness  in  molding  sand  anywhere,  and  was 
not  connected  witli  a  transfer  of  anything  in  the  way  of  a 
business  or  a  plant.  As  to  the  plaintiff's  agreement,  the  appel- 
lant is  incorrect  as  to  the  general  nature  of  its  restraint  upon 
the  plaintiff.  The  finding  is,  and  the  evidence  supports  it,  that 
the  plaintiff's  agreement  related  only  to  the  purchase  and  sale 
of  Albany  molding  sand ;  that  is,  molding  sand  from  the  county 
of  Albany.  However,  I  should  not  regard  it  as  of  any  con- 
trolling importance  if  it  were  as  broad  as  the  appellant  claims. 
The  feature  which  is  said  to  distinguish  this  case  from  our  prior 
decisions  upon  the  subject  is  that  the  plaintiff's  agreement  was 
unaccompanied  by  the  sale  of  any  business  plant  or  stock.  At 
the  time  of  contracting  with  the  defendant  he  had  neither.  He 
was  engaged  in  the  business  of  buying  and  selling  Albany 
molding  sand,  and  was,  presumably,  a  business  rival  of  the 
defendant.  By  this  contract  he  agreed  to  discontinue  his  busi- 
ness, and  to  turn  over  to  the  defendant  all  ordei-s  for  sand 
which  he  then  had  or  might  thereafter  receive.  The  effect  of 
the  arrangement  was  to  transfer  to  the  defendant  the  good  will 
or  custom  of  the  business  wliich  he  had  built  up,  and  to  cease 
to  be  its  competitor  to  the  extent  described.  That  a  man  may 
not  contract  as  he  will  with  respect  to  himself  or  to  his  property 
rights  demands  the  intervening  of  some  authoritative  reason, 
founded  in  considerations  of  public  policy.     The  denial  of  the 


76      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

right  can  only  be  reasonable  when  to  permit  its  exercise  is  seen 
to  be  fraught  with  consequences  injurious  to  the  interests  of 
society.  The  state  has  a  right  to  limit  individual  rights  where 
their  exercise  touches  the  public  interests,  and,  if  unrestrained, 
would  be  prejudicial  to  order  or  to  progress.  The  doc-trine 
which  avoids  a  contract  for  being  one  in  restraint  of  trade  is 
founded  upon  a  public  policy.  It  had  its  origin  at  a  time  when 
the  field  of  human  enterprise  was  limited,  and  when  each  man's 
industrial  activity  was,  more  or  less,  necessary  to  the  material 
well-being  and  welfare  of  his  community  and  of  the  state.  A 
discussion  of  the  doctrine  and  the  history  of  the  law  appear  in 
the  cases  of  Match  Co.  v.  Roeber,  106  N.  Y.  473,  and  of  Leslie 
V.  Lorillard,  110  N.  Y.  519,  1  L.  R.  A.  456.  The  conditions 
which  made  so  rigid  a  doctrine  reasonable  no  longer  exist.  In 
the  present  practically  unlimited  field  of  human  enterprise 
there  is  no  good  reason  for  restricting  the  freedom  to  contract, 
or  for  fearing  injury  to  the  public  from  contracts  which  prevent 
a  person  from  carrying  on  a  particular  business.  Interference 
would  only  be  justifiable  when  it  was  demonstrable  that,  in 
some  way,  the  public  interests  were  endangered.  But  contracts 
between  parties,  which  have  for  their  object  the  removal  of  a 
rival  and  competitor  in  a  business,  are  not  to  be  regarded  as 
contracts  in  restraint  of  trade.  They  do  not  close  the  field  of 
competition,  except  to  the  particular  party  to  be  affected.  To 
say,  at  the  present  day,  that  such  a  contract  as  was  made  in 
this  case  was  affected  by  a  public  interest  and  was  a  matter  of 
public  concern  would  be,  in  my  opinion,  unreasonable.  Such 
a  contract  not  only  does  not  obstruct  trade,  but  it  may  be  for 
the  advantage  of  the  public  as  well  as  of  the  individual.  Story, 
Cont.  §  551.  Heretofore,  in  most  of  the  cases  which  have  come 
before  the  courts,  the  covenant  to  refrain  from  a  calling  within 
a  territory  described  accompanied  a  sale  of  the  business  itself, 
vrith  all  its  appliances  or  appurtenances.  For  obvious  reasons, 
that  would  be  so;  but,  if  the  calling  be  one  which  is  follo5S£,d^ 
without  a  business 'plant,  is  any  principle  of  public  policy  the 
more  violated  by  a  covenant  to  discontinue  it?  Clearly  not, 
and  this  court  has  not  held  to  that  effect.  Indeed,  its  utterances 
have  intimated  to  the  contrary.  Leslie  v.  Lorillard,  supra,  is 
much  in  point,  where  the  contract  was  that  a  steamship  company 
would,  in  consideration  of  monthly  payments,  discontinue  its 


THE  COMMON  LAW  77 

business  of  running  vessels  between  certain  ports.    The  contract 
was  not  considered  to  be  objectionable.     Quite  recently  it  was 
said  by  Judge  Landon,  speaking  for  this  court,  in  the  case  of 
Cummings  v.  Stone  Co.,  164  N.  Y.  401,  that  "it  may  be  conceded 
that  the  law,  as  now  understood,  restrains  no  one  from  selling 
his  property,  nor  does  it  compel  any  one  to  continue  a  business 
which  he  can  sell  or  finds  it  to  his  interest  to  abandon,  much 
less  to  continue  it  for  any  time  or  in  any  particular  manner  or 
place."    The  Match  Case,  the  Leslie  Case,  and  the  case  of  Tode 
V.  Gross,  127  N.  Y.  480,  13  L.  R.  A.  652,  were  cited  and  relied 
upon.    In  Brett  v.  Ebel,  29  App.  Div.  256,  Mr.  Justice  Barrett 
considered  a  similar  question,  and  it  was  there  held  that  the 
contract  in  question,  which  involved  only  the  sale  of  the  good 
will  of  the  particular  business,  was  not  within  the  application 
of  the  doctrine.     The  plaintiff  exercised  his  right  to  agree  to  I 
go  out  of  the  business,  for  an  advantage  deemed  to  be  gained! 
by  him  in  so  agreeing,  and  he  also  agreed  to  turn  over  to  the  \ 
defendant  his  good  will  and  custom.     I  think  the  contract  did  ; 
not  come  within  the  condemnation  of  the  law. 

The  case  of  Francisco  v.  Smith,  143  N.  Y.  488,  is  not  at  all 
opposed  to  this  view.  It  was  stated  in  the  opinion,  what  is  an 
evident  fact,  that  an  agreement  not  to  engage  in  a  particular 
business  is  a  valuable  right,  in  connection  with  the  business  it 
was  designed  to  protect,  and  that  if  the  business  had  not  been 
disposed  of  there  would  have  been  nothing  for  the  agreement 
to  operate  upon.  In  that  case  the  covenant  accompanied  the 
transfer  of  the  business,  and  the  vendee  was  held  capable  of 
further  assigning  the  covenant,  in  connection  with  his  sale  of 
the  business,  to  another. 

I  think  the  judgment  should  be  affirmed,  with  costs. 

Parker,  G.  J.,  and  O'Brien,  Cullen,  and  Wernes,  JJ.,  con- 
cur.   Haight,  J.,  absent.    Landon,  J.,  not  sitting. 

Judgment  affirmed.'^^ 

14_See  Mapes  v.  Metealf,  10  No.  strued    as    sale    of    good-will    of    a 

Dak.  601    (contract  to  refrain  from  printing   business    pure    and   simple 

carrying    on    printing   business,   the  and  a  restriction  by  the  covenantor 

consideration  being  a  share  in  the  — held  legal), 
covenantee's  printing  business — con- 


"v"'^ 
u- 


/" 


^  ^Vs      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

<-  OAKDALE  MANUF'G  CO.  v.  GARST 

V  ,  (Supreme  Court  of  Rhode  Island,  1894.     18  R.  I.  484.) 

A' 

^»  Bill  in  equity  by  the  Oakdale  Manufacturing  Company  and 

off     others  against  Sebastian  Garst  for  an  injunction  to  restrain  the 

5|U  defendant  from  carrying  on  business  in  violation  of  the  follow- 

Ji(/9         ing  agreement: 

"^       ^      "And  it  is  further  mutually  covenanted  and  agreed  by  and 

^^    ^.  between  the  parties  hereto,  each  for  himself,  however,  and  not 

S'  ^        for  the  others,  that  they  will  not  engage,  directly  or  indirectly, 

in  any  business  of  the  same  kind,  or  for  the  same  purpose  or 

,^;  purposes,  as  that  to  be   carried  on  by  the  corporation  to  be 

•  ■  formed ;  nor  will  they  directly  or  indirectly  be  concerned  in  or 

■"^   Ay^'  be  interested  in  any  firm,  firms,   corporation,  or  corporations 

V^       ^  engaged  in  the  same  business  or  business  similar  to  the  business 

J.  Jl*^*is     of  the  corporation  to  be  formed  for  the  period  of  five  years 

^    v^         from  and  after  the  date  of  this  agreement." 

♦^  The  complainant,  the  Oakdale  Manufacturing  Company,  is  the 

^  .  *       corporation  organized  by  the  other  parties  to  the  suit,  under  the 

^'-^        laws  of  the  state  of  Kentucky,  in  pursuance  of  the  agreement 

y       /     referred  to  in  the  opinion  of  the  court. 

Arnold  Green,  Richard  B.  Comstock,  and  Rathbone  Gardner, 
for  complainants.     Simon  S.  Lapham,  for  respondent. 

STINESS,  J.  The  complainants  seek  an  injunction  against 
tbe  respondent  to  restrain  him  from  violating  his  covenant  that 
he  would  not  engage  or  be  concerned  in,  directly  or  indirectly, 
the  manufacture  or  sale  of  butterine  or  oleomargarine,  for  the 
space  of  five  years  from  the  date  of  the  covenant.  Prior  to 
April  30,  1891,  the  parties  carried  on  that  business  separately, 
when  they  agreed  to  unite  and  form  a  corporation  for  the  pur- 
pose of  carrying  on  their  business  together.  To  this  end,  all 
the  parties  turned  in  the  stock,  machinery,  accounts,  and  good 
will  of  their  respective  concerns,  at  a  valuation  greatly  in  excess 
of  the  value  of  the  property  itself,  taking  an  amount  of  stock 
in  the  corporation  represented  by  such  valuation.  The  corpora- 
tion has  carried  on  the  business  since  that  time.  In  August, 
1892,  the  defendant  sold  his  stock  in  the  company,  to  present 
holders,  for  $60,000,  although,  as  he  says,  the  property  it  repre- 
sented was  worth  only  about  $28,000.     After  this  he  entered  the 


THE  C0]\OI0N  LAW  79 

same  business  again,  and  claims  the  right  to  do  so  upon  the 
following  grounds,  viz. : 

(1)  That  he  was  induced  to  enter  into  the  contract  through 
false  and  fraudulent  misrepresentations  of  the  complainants. 

(2)  That  the  contract  is  void  as  a  combination  to  raise  the 
price  of  a  necessary  and  useful  commodity  in  trade,  and  to  stifle 
competition. 

(3)  That  one  purpose  of  the  contract  was  to  form  a  corpora- 
tion in  violation  of  the  laws  of  this  state. 

(4)  That,  the  contract  being  in  restraint  of  trade,  its  enforce- 
ment is  unreasonable. 

As  to  the  first  defense,  it  is  sufficient  to  say  that  we  do  not 
find  it  to  be  supported  by  the  evidence.  The  respondent  knew 
perfectly  well  what  he  was  doing  in  making  the  arrangement, 
and  agreed  to  it  freely.  The  facts  that  one  of  the  companies 
was  using  a  secret  process  to  preserve  the  freshness  of  the  prod- 
uct, so  that  it  could  be  exported  to  tropical  climates,  and  that  it 
was  engaged  to  some  extent  in  such  export  are  shown  by  the 
proof. 

In  support  of  the  second  ground  of  defense,  the  respondent 
cites  cases  of  contracts  to  create  a  monopoly  and  to  force  prices. 
Such  was  People  v.  North  River  Sugar  R-efining  Co.,  54  Hun. 
354,  a  proceeding  to  vacate  the  charter  of  the  company  because 
it  had  become  a  partner  in  the  "Sugar  Trust."  The  unlaw- 
fulness of  such  a  combination  was  largely  dwelt  upon,  but  in 
the  court  of  appeals  (121  N.  Y.  582)  the  decision  was  sus- 
tained only  upon  the  ground  that  the  company  had  prac- 
tically relinquished  its  corporate  functions,  and  so  had  for- 
feited its  franchise.  Arnot  v.  Coal  Co.,  68  N.  Y.  558;  Craft 
v.  McConoughy,  79  111.  346;  Morris  Run  Coal  Co.  v.  Barclay 
Coal  Co.,  68  Pa.  St.  173;  and  Emery  v.  Candle  Co.,  47 
Ohio  St.  320,  were  cases  where  contracts,  based  upon  a 
monopoly,  were  held  to  be  invalid.  Undoubtedly,  there  may  be 
combinations  so  destructive  of  the  right  of  the  people  to  buy  and 
sell  and  to  pursue  their  business  freely  that  they  must  be 
declared  to  be  void  upon  the  ground  of  public  policy.  In  such 
cases  the  injury  to  the  public  is  the  controlling  consideration. 
But  it  does  not  follow  that  every  combination  in  trade,  even 
though  such  combination  may  have  the  effect  to  diminish  the 
number  of  competitors  in  business,  is  therefore  illegal.     Such 


80      COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

a  rule  would  produce  greater  public  injury  than  that  which  it 
would  seek  to  cure.     It  would  be  impracticable.     It  would  for- 
bid partnerships  and  sales  by  those  engaged  in  a  common  busi- 
ness.    It  would  cut  off  consolidations  to  secure  the  advantages 
of  united  capital  and  economy  of  administration.     It  would  pre- 
vent all  restrictions  and  exclusive  privileges,  and  hamper  the 
familiar  conduct  of  commerce  in  many  ways.     There  may  be 
many  such  arrangements  which  will  be  beneficial  to  the  parties, 
and  not  injurious  to  the  public.     Monopolies  are  liable  to  be 
oppressive,  and  hence  are  deemed  to  be  hostile  to  the  public  good. 
But  combinations  for  mutual  advantage,  which  do  not  amount 
to  a  monopoly,  but  leave  the  field  of  competition  open  to  others, 
are  neither  within  the  reason  nor  the  operation  of  the  rule.     This 
is  well  put  in  Skrainka  v.  Scharringhausen,  8  Mo.  App.  522, 
where  24  owners  of  stone  quarries,  on  account  of  a  ruinous  com- 
petition, which  made  it  impossible  to  work  their  quarries  at  a 
profit,  made  an  agreement  to  sell  through  a  common  agent  for 
the  space  of  six  months,  and  the  agreement  was  sustained.     The 
court  says:     "But  not  every  agreement  in  restraint  of  trade  is 
illegal.     Where  the  contract  injures  the  parties  making  it,  by 
diminishing  their  means  for  supporting  their  families,  tends  to 
deprive  the  public  of  the  services  of  useful  men,  discourages 
the  industry,  diminishes  the  production,  prevents  competition, 
enhances  prices,  and,  being  made  by  large  companies  or  cor- 
porations, excludes  rivalry,  and  engrosses  the  markets, — tends 
to  'make  a  corner,'  to  use  the  slang  of  the  stock  and  provision 
gamblers, — it  is  against  the  policy  of  the  law.     But  restraints 
upon  trade  imposed  by  agreement,  under  limitations  as  to  local- 
ity, time,  and  persons,  are  not  necessarily  restraints  of  trade 
in  the  general  sense  which  is  objectionable."     So  in  Tode  v. 
Gross,    127    N.    Y.   480,    the   defendants  had   sold   their  busi- 
ness of  making  cheese  by  a  secret  process,  under  a  general 
restriction  not  to  engage  in  the  business  for  five  years,  with 
reference  to  which  it  is  said:     "The  covenant  was  not  in  gen- 
eral restraint  of  trade,  but  was  a  reasonable  measure  of  mutual 
protection  to  the  parties,  as  it  enabled  the  one  to  sell  at  the 
highest  price,   and  the   other  to  get  what  they  paid  for.     It 
imposed  no  restriction  on  either  that  was  not  beneficial  to  the 
other  by  enhancing  the  price  to  the  seller  or  protecting  the 
purchaser.     Recent  cases  make  it  very  clear  that  such  an  agree- 


THE  COMMON  LAW 


81 


ment  is  not  opposed  to  public  policy,  even  if  the  restriction  was 
unlimited  as  to  both  time  and  territory.     The  rcstrictio-n  under 
consideration,  however,  was  not  unlimited  as  to  time."     These 
two  cases  state  a  very  sensible  rule,  both  as  to  the  public  and  the 
parties,  and  they  are  exactly  like  the  case  before  us.     Here  there 
is  no  monopoly.     Three  of  the  four  companies  in  New  England  ' 
in  this  line  of  manufacture  agreed  to  unite;  one  inducement  : 
being  to  stop  the  sharp  competition  then  existing  between  them,  j 
But  even  so,  not  only  is  the  field  open  to  the  other  company,  ^ 
equal  in  strength  to  either  of  these,  but  it  is  also  open  to  com- 
petition from  companies  in  other  parts  of  the  country  and  to  the 
formation  of  new  companies.     This  is  neither  monopoly,   nor  ] 
such  an  approach  to  it  as  amounts  to  the  same  thing.     It  is  the 
common  occurrence  of  a  consolidation  of  firms.     It  is  not  illegal  » 
on  the  ground  of  reducing  competition.^^ 


15 — Accord:  Anchor  Electric  Co. 
V.  Hawkes,  171  Mass.  101;  Mere- 
dith V.  -New  Jersey  Zinc  &  Iron 
Co.,  55  N.  J.  Eq.  211.  In  the  latter 
case  Pitney,  V.  C,  said: 

"It  remains  to  consider  the  ques- 
tion of  illegal  combination,  which 
would  subject  the  new  corporation 
to  an  attack  by  the  attorney  gen- 
eral. Upon  such  consideration  as 
the  four  days  allowed  me  for  that 
purpose  has  permitted  me  to  give 
the  subject,  I  think  that  there  is 
nothing  in  that  ground. 

"The  circumstances  show  that 
it  is  not  the  object  or  purpose  of 
the  contract  to  create  a  monopoly. 
The  aflBdavit  of  the  president  of 
the  New  Jersey  Zinc  &  Iron  Com- 
pany shows  that  the  zinc  ores 
which  will  be  controlled  by  it  after 
these  several  purchases  constitute 
but  a  small  fraction  of  the  world's 
supply,  and  that  its  product  of  zinc 
will  also  be  but  a  smaU  fraction 
of  that  produced  throughout  the 
country.  Besides,  buying  up  by 
one  corporation  of  the  property  of 
another,     and     consolidating     the 

Kales  R.  of  T.  Vol.  1—6 


whole  into  one  business,  to  the  ex- 
tent and  in  the  manner  provided 
for  in  this  agreement,  is  not,  in  my 
judgment,  contrary  to  public  pol- 
icy, nor  does  it  tend  to  create  a 
monopoly.  The  question  was  care- 
fully examined  by  Vice  Chancellor 
Green  in  Ellermann  v.  Stockyards 
Co.,  49  N.  J.  Eq.  217,  and  that  opin- 
ion was  reviewed  and  reaflSrmed  in 
the  subsequent  case  of  Willoiighby 
V.  Stockyards  Co.,  50  N.  J.  Eq.  656, 
heard  by  both  Vice  Chancellor  Green 
and  Vice  Chancellor  Van  Fleet,  and 
they  concurred  in  the  same  result. 

"It  must  be  remembered,  in  this 
connection,  that  these  companies 
are  not  exercising  any  public  fran- 
chise of  carrying  passengers  or 
goods,  but  only  the  franchise  of 
being  a  corporation.  Their  busi- 
ness is  one  that  may  be  conducted 
by  private  individuals.  They  are 
simply  the  owners  of  a  certain 
species  of  property  which  in  its 
natural  state  is  of  no  use  to  man- 
kind, and  which  after  it  has  been 
manufactured  and  made  fit  for  use 
can  hardly  be  classed  as  a  neces- 


82      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

With  reference  to  the  third  ground  of  defense,  it  does  not 
appear  that  the  agreement  in  any  way  violates  the  laws  or  policy 
of  this  state,  and  if  it  did,  the  defendant,  being  a  party  to  it, 
could  not  set  it  up.  Chafee  v.  Manufacturing  Co.,  14  R.  I.  168. 
The  mere  fact  that  the  complainant  corporation  is  created  under 
the  laws  of  the  state  of  Kentucky  is  not  sufficient  to  warrant  a 
dismissal  of  its  case,  for  foreign  corporations  have  frequently 
been  recognized  as  suitors  in  this  court.  Bank  v.  Kendall,  7 
R.  I.  77;  Machine  Co.  v.  York,  11  R.  I.  388;  Smelting  Co.  v. 
Smith,  13  R.  I.  27;  Manufacturing  Co.  v.  King,  14  R.  I.  511. 
They  are  also  recognized  as  doing  business  here  by  comity. 
Pierce  v.  Crompton,  13  R.  I.  312.  While  the  fact  that  citizens 
of  Rhode  Island  go  to  Kentucky  for  an  act  of  incorporation  is 
one  that  naturally  excites  curiosity,  if  not  suspicion,  as  to  the 
motives  and  good  faith  of  the  concern,  yet  so  long  as  it  pursues 
a  lawful  business,  and  violates  no  law  of  this  state,  we  do  not  see 
how  we  can  refuse  to  recognize  it.  True,  the  advantages  of 
yearly  statements  and  liability  of  stockholders,  given  to  creditors 
under  our  statute,  are  wanting;  but  that  is  a  matter  for  those 
who  deal  with  the  corporation  to  consider.  We  can  hardly  deny 
the  right  of  a  foreign  corporation  to  do  business  in  this  state, 
upon  considerations  of  public  policy,  when  our  own  statutes 

sity.     The  law  forbidding  forestall-  entertain  the  hope  aijd  expectation 

ing    the    market    does    not,    in    my  that    its    individual    members    will 

judgment,  apply  to  the  purchase  of  generally,    in    their    several    strug- 

such    property.      Jac.    Law    Diet.;  gles  to  acquire  the  means  of  com- 

Bouv.    Law    Diet.    tit.    'Forestall-  fortable    existence,    compete    with 

ing.'     By    the    law    of    the    land  each  other.     But  such  expectation 

these  owners  have  the  right  to  ex-  is  based  entirely  upon  the  exercise 

ercise    their    own    judgment    as   to  of  the  free  will  and  choice  of  the 

when,  if  ever,  and  how,  they  will  individual,  and  not  upon  any  legal 

spend    their    money    in    preparing  or  moral  duty  to  compete,  and  can 

their  property  for  market  and  ren-  never,   from   the  nature  of  things, 

dering  it   fit  for  use  by  mankind.  become   a  matter   of   right   on   the 

Now,  I  am  unable  to  find  any  foun-  part  of  the  public  against  the  indi- 

dation,  either  in  law  or  in  morals,  vidual.    In  fact,  the  essential  qual- 

for  the  notion  that  the  public  have  ity  of  that  series  of  acts  or  course 

the    right    to    have    these    private  of  conduct  which  we  call  'competi- 

owners  of  this  sort  of  property  con-  tion '  is  that  it  shall  be  the  result 

tinue  to  do  business  in  competition  of  the  free  choice  of  the  individ- 

with    each    other.      No    doubt    the  ual,  and  not  of  any  legal  or  moral 

public    has    reasonable    ground    to  obligation  or  duty." 


THE  COMMON  LAW  83 

(Pub.  Laws,  c.  1200)  expressly  provide  for  corporations  formed 
in  this  state  for  carrying  on  business  out  of  the  state. 

The  fourth  ground  of  defense  involves  the  reasonableness  of 
the  restrictive  covenant.  The  test  of  reasonableness  is  the  test 
of  validity  in  contracts  of  this  kind.  The  test  is  to  be  applied 
according  to  the  circumstances  of  the  contract,  and  it  is  not  to 
be  arbitrarily  limited  by  boundaries  of  time  and  space.  There 
has  been  much  discussion  upon  this  subject,  which  need  not  be 
repeated.  The  law  has  advanced,  pari  passu  with  social 
progress,  to  a  point  of  practical  unanimity.  The  rule,  now 
generally  received,  has  been  recognized  in  this  state,  that 
contracts  in  restraint  of  trade  are  not  necessarily  void  by 
reason  of  universality  of  time  (French  v.  Parker,  16  R.  I. 
219,  nor  of  space  (Herreshoff  v.  Boutineau,  17  R.  I.  3; 
but  they  depend  upon  tiie  reasonableness  of  the  restrictions  under 
the  conditions  of  each  case.  The  diversity  of  these  conditions 
produces  an  apparent  diversity  of  decision,  and  yet  it  will  be 
found  upon  examination  that  most  of  the  oases  really  turn  upon 
the  reasonableness  of  the  restriction.  For  example,  in  Wiley  v. 
Baumgarden,  97  Ind.  66,  cited  by  the  respondent,  sale  was  made 
of  a  dry-goods  store,  with  the  vendor's  agreement  not  to  engage 
in  the  dry-goods  business  for  five  years;  and  in  Herreshoff  v. 
Boutineau  the  agreement  was  not  to  teach  within  this  state.  In 
these  cases  the  subjects  of  the  contracts  were  of  a  purely  local 
character,  and  outside  restraint  was  unreasonable.  On  the 
other  hand,  in  Thermometer  Co.  v.  Pool,  51  Hun.  157, 
where  the  business  was  extensive,  restraint  within  the  entire 
territory  of  the  United  States,  and  in  Tode  v.  Gross,  127 
N.  Y,  480,  unlimited  restraint  as  to  territory,  were  sus- 
tained. The  contract  is  to  be  determined  by  its  subject- 
matter  and  the  conditions  under  which  it  was  made;  by 
considerations  of  extensiveness  or  localism,  of  protection  to  inter- 
ests sold  and  paid  for,  or  mere  deprivation  of  public  rights  for 
private  gain,  of  proper  advantage  on  one  side,  or  useless  oppres- 
sion on  the  other.  In  this  case  the  contracting  parties  were  all 
capable  business  men.  They  knew  what  they  were  about.  The 
clause  objected  to  was  mutually  beneficial  and  equally  restrict- 
ive. The  respondent  was  to  gain  as  much  advantage  from  it  as 
any  of  the  others,  so  long  as  he  remained  in  the  company,  and 
in  case  of  sale  it  would  enhance  the  value  of  his  stock.     And  this 


84      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

it  did ;  for,  when  he  sold  his  stock,  he  received  for  it  more 
than  double  what  he  testified  the  property  was  worth.  Having 
received  this  large  price  for  his  stock,  he  now  seeks  to  destroy 
its  value  upon  the  ground  that  the  original  agreement  was  unrea- 
sonable. The  circumstances  show  that  it  was  not  unreasonable. 
The  parties  contemplated  an  extensive  business,  with  a  special 
effort  to  develop  an  export  trade.  No  limitation  of  foreign  coun- 
tries could  be  made  in  advance,  for  the  company  was  to  seek  its 
markets.  In  this  country  it  might  need  to  set  branches  in  dif- 
ferent parts  for  the  sale  or  manufacture  or  exportation  of  its 
products.  Time  was  needed  to  ascertain  what  could  be  done, 
and  where,  and  so  the  term  of  five  years  was  agreed  upon  within 
which  the  company  should  be  free  to  seek  its  field  of  operation. 
To  allow  the  respondent  now  to  overthrow  that  agreement  would 
be  grossly  inequitable.  We  think  the  complainants  are  entitled 
to  the  relief  prayed  for. 


K 


\^' 


,^'' 


Y 


^  V  WICKENS  V.  EVANS 


^■'    ,   .  v>.  (Court  of  Exchequer,  1829.     3  Younge  &  Jervis,  318.) 

_Ph  Assumpsit.     The  first  count  of  the  declaration  stated,  that, 

,^,    ■''■'''^,      •  before  and  at  the  time  of  making  the  articles  of  agreement, 

''  y  and  the  promise  and  undertaking  of  the  said  defendant  there- 
inafter next  mentioned,  the  said  plaintiff  was  a  box-maker,  and 
the  trade,  business,  and  calling  of  a  box-maker  had  used,  exer- 

/  J^''".  ,  y^  cised,  and  carried  on,  and  still  did  use,  exercise,  and  carry  on, 

.    /•■**^  .  on  to-wit,  at  Oxford,  in  the  County  of  Oxford ;  and  whereas, 

"''^  1  tw  before  and  until  the  making  of  the  said  articles  of  agreement, 

Jifjf-^  the  said  plaintiff,  from  time  to  time,  traveled,  by  himself  and 

iJL    ^^  0^  ^^^  servants,   into  various  parts   of  the   country,   and   of   the 

'*- t^y^  several  districts  in  the  said  articles  of  agreement  mentioned 

iS"^^^^  ftjd^  ^^^  referred  to,  for  there  vending  trunks  and  boxes,  by  him 

'->^  -flft^^  made   in  his  said  trade,   business,   and   calling;   and  the   said 

*^,tj^  ^^  defendant  and   one   William   Fletcher   also   severally   and   re- 

T             Vjh^  spectively  exercised   and  carried  on  the  said  trade,   business, 

iX   ^'^^  ^^^    calling    of   box-makers,    and,    severally    and    respectively, 

^^           0^  traveled  into  various  parts  of  the  country  and  of  the  several 

^  districts  aforesaid,  for  there  severally  and  respectively  vending 


THE  COMMON  LAW  85 

and  selling  trunks  and  boxes,  to-wit,  at  Oxford,  aforesaid,  in 
the  county  aforesaid;  and  thereupon,  theretofore,  to-wit,  oo, 
&c.,  at,  &c.,  by  certain  articles  of  agreement,  bearing  date  a 
certain  day  and  year,  to-wit,  &c.,  then  and  there  made  and 
entered  into,  between  the  said  William  Fletcher,  of  the  first 
part;  the  said  defendant,  of  the  second  part;  and  the  said 
plaintiff,  of  the  third  part;  reciting,  that,  whereas  the  said 
William  Fletcher,  Daniel  Evans,  and  Joseph  Wickens  had,  for 
several  years  last  past,  traveled  into  various  parts  of  the  coun- 
try, vending  trunks  and  boxes  for  sale,  but,  on  account  of  the 
inconvenience  and  loss  which  they  severally  acknowledged  to 
sustain,  by  reason  of  their  exercising  their  trade  and  calling  in 
places  which  they  wished  to  keep  separate  and  distinct  from 
each  other,  they,  the  said  William  Fletcher,  Daniel  Evans,  and 
Joseph  Wickens,  had,  in  consideration  thereof,  agreed  to  divide 
the  same,  and  enter  into  the  terms  and  conditions  thereinafter 
mentioned  relative  to  such  division,  (that  is  to  say),  the  said 
William  Fletcher,  Daniel  Evans,  and  Joseph  Wickens  did 
thereby,  severally  and  respectively,  agree  with  each  other  to 
divide,  and  not  interfere  with  certain  districts  of  the  several 
cities,  boroughs,  towns  and  villages,  set  forth  on  Bowles's  Post- 
map  of  England  and  Wales,  thereto  annexed  and  referred  to, 
and  signed  with  the  respective  proper  handwriting  of  the  said 
William  Fletcher,  Daniel  Evans,  and  Joseph  Wickens,  it  being 
the  true  intent  and  meaning  of  the  said  parties  thereto,  and  of 
those  present,  that  the  said  William  Fletcher  should  and  might, 
at  all  times  thereafter,  during  the  life  of  the  said  William 
Fletcher,  by  himself  and  his  agents  (duly  authorized  only), 
travel  into,  to  sell  trunks  and  boxes  in  his  way  of  business, 
without  any  interruption  whatsoever  by  the  said  Daniel  Evans 
and  Joseph  Wickens,  or  either  of  them,  during  their  joint 
natural  lives,  in  the  several  cities,  boroughs,  towns  and  villages, 
marked  with  ink,  and  set  out  with  black  cotton,  so  set  forth  and 
described  on  the  said  map,  as  aforesaid;  and  also,  that  the  said 
Daniel  Evans  should  and  might,  at  all  times  thereafter,  during 
the  life  of  him  and  the  said  Daniel  Evans,  by  himself  and  his 
agents  (duly  authorized  only),  travel  into,  to  sell  trunks  and 
boxes  in  his  way  of  business,  without  any  interruption  what- 
soever by  the  said  William  Fletcher  and  Joseph  Wickens,  or 
either  of  them,  during  their  joint  natural  lives,  in  the  several 


86      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

cities,  boroughs,  towns,  and  villages,  marked  with  ink,  and  set 
out  with  black  cotton,  so  set  forth  and  described  on  the  said 
map,  as  aforesaid;  and  also,  that  the  said  eJoseph  Wiekens 
should  and  might,  at  all  times  thereafter,  during  the  life  of 
him  the  said  Joseph  Wiekens,  by  himself  and  his  agents  (duly- 
authorized  only)  travel  into,  to  sell  trunks  and  boxes  in  his  way 
of  business,  without  any  interruption  whatsoever  by  the  said 
William  Fletcher  and  Daniel  Evans,  or  either  of  them,  during 
their  joint  natural  lives,  in  the  several  cities,  boroughs,  towns, 
and  villages,  marked  with  ink,  and  set  out  with  black  cotton, 
so  set  forth  and  described  on  the  said  map,  as  aforesaid.  And 
it  was  thereby  further  agreed  by  and  between  the  said  parties 
thereto,  that  they,  and  each  of  them,  should  also  be  at  liberty 
to  travel,  for  such  purposes  of  trade  as  aforesaid,  during  their 
joint  natural  lives,  as  aforesaid,  to  all  such  other  places  as 
might  thereafter  be  built,  although  not  set  forth  on  the  said 
map,  so  as  such  trading  should  not  interfere  with  either  of  the 
said  districts  of  the  said  parties  thereto,  so  respectively  marked 
out  on  the  said  map  as  aforesaid;  and  also,  it  was  thereby 
further  agreed  by  and  between  the  said  parties  thereto,  that 
they  should  not,  directly  or  indirectly,  allow  or  suffer  any 
goods  in  their  said  trade  to  be  manufactured  at  their  respective 
shops  or  warehouses,  or  be  sent  from  their  or  his  respective 
shops,  houses,  or  warehouses,  or  from  any  other  place,  for  the 
purpose  of  being  sold  or  disposed  of,  on  the  ground  to  be 
traveled  by  the  said  parties  thereto,  so  marked  out  on  the  said 
map  as  aforesaid,  or  in  any  manner  whatsoever  participate  in 
any  profits  arising  from  any  sale  of  the  said  goods  in  such 
respective  districts  as  aforesaid,  and  so  thereby  agreed  to  be 
divided  as  aforesaid;  and  also,  should  not  aid  and  assist  any 
person  or  persons  whomsoever,  to  oppose  all,  any,  or  either  of 
the  said  parties  thereto,  in  the  said  trade,  in  England  and 
Wales;  and  it  was  thereby  further  mutually  agreed  by  and 
between  the  said  parties  thereto,  that  they  and  each  of  them 
should  not  nor  would,  during  their  joint  natural  lives,  as  afore- 
said, buy  or  purchase  any  tea  chest  or  chests,  black  or  green,  at 
a  higher  price  than  6d.  or  8d.  each,  in  Oxford;  and  it  was 
thereby  lastly  agreed  by  and  between  aU  the  said  parties  thereto, 
that  they  should  not,  by  themselves,  or  either  of  them  by  him- 
self, nor  should  their,  or  either  of  their  servants  or  agents  in 


THE  COIVOION  LAW  87 

that  behalf,  travel  into  the  districts  of  each  other,  so  set  forth 
on  the  said  map,  or  into  any  other  place  which  might  be  there- 
after built,  forming  the  route  of  either  of  the  said  parties 
thereto,  in  the  way  of  their  or  his  said  trade  and  business,  to 
the  injury  and  prejudice  of  each  other.  And  for  the  true 
performance  of  that  agreement,  each  of  the  said  parties  thereto 
bound  himself  unto  the  other  of  them,  in  the  sum  of  £40  as  to 
the  sale  of  trunks  and  boxes,  and  £10  as  to  the  purchase  of  any 
tea  chest  or  chests,  black  or  green,  at  a  higher  price  than  above 
stated,  for  each  and  every  offense  or  infringement  of  all  or  any 
of  the  clauses  above  contained,  to  be  recovered  by  way  of  liqui- 
dated damages,  against  the  party  or  parties  who  should  be 
guilty  of  any  breach  of  that  agreement,  or  of  any  part  thereof. 
And,  moreover,  it  was  further  agreed,  that  if,  at  any  time 
thereafter,  during  the  joint  natural  lives  of  the  said  parties 
thereto,  any  person  or  persons  should  set  up  and  oppose  any  or 
either  of  the  said  parties,  in  the  said  trade  of  box  and  trunk 
making  in  England  and  Wales,  then,  that  the  said  parties 
thereto  should  and  would  meet  together,  and  enter  into  such 
mutual  agreement,  to  the  intent  therein  above  agreed  to,  as 
should  be  beneficial  to  the  mutual  interests  of  the  said  parties 
thereto,  it  being  their,  and  each  of  their,  true  intention,  not  to 
do  any  act,  prejudicial  to  the  interests  of  each  other,  but  to 
aid  and  assist  each  other  in  the  said  trade  and  business,  to  the 
utmost  of  their  power. 

Breach— That  the  said  defendant,  not  regarding  the  said 
articles  of  agreement,  nor  his  said  promise  and  undertaking, 
did,  afterwards,  to  wit,  on,  &c.,  and  at  and  on  divers,  to  wit, 
nine  other  times  and  occasions,  between  that  day  and  the  day 
of  exhibiting  the  bill  of  the  said  plaintiff  against  the  said  de- 
fendant, travel,  by  himself  and  his  servants  and  agents  in  that 
behalf,  into  the  district  of  the  said  plaintiff,  so  set  forth  on  the 
said  map,  in  the  way  of  his,  the  said  defendant's,  said  trade  and 
business,  to  the  injury  and  prejudice  of  the  said  plaintiff,  and 
did  thereby  commit  divers,  to  wit,  ten  offenses  and  infringe- 
ments of  the  said  articles  of  agreement  against  him  the  said 
plaintiff,  whereby,  and  according  to  the  form  and  effect  of  the 
said  articles  of  agreement,  the  said  defendant  forfeited  and 
became  liable  to  pay  to  the  said  plaintiff  the  sum  of  £40  of 
lawful  money  of  Great  Britain,   for  each   and   every  of  said 


88      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

offenses  and  infringements  of  the  said  articles  of  agreement  by 
him  the  said  defendant,  amounting  together  to  a  certain  large 
sum  of  money,  to-wit,  the  sum  of  £400,  &c. 

The  second  count,  after  setting  forth  the  agreement  as  in  the 
first  count,  proceeded  to  aver,  as  breaches,  that  the  defendant, 
on  divers,  to-wit,  nine  times  and  occasions,  did  travel,  by  him- 
self, and  his  servants  and  agents  in  that  behalf,  into  the  district 
of  the  plaintiff,  in  the  way  of  the  defendant's  trade  and  busi- 
ness, and  did,  at  and  on  each  of  those  times  and  occasions,  sell 
and  dispose  of  divers  large  quantities  of  trunks  and  boxes,  in 
the  way  of  his  said  trade  and  business,  amounting,  in  the  whole, 
to  a  large  sum  of  money,  to-wit,  the  sum  of  £3,000,  and  thereby 
hindered  and  prevented  the  said  plaintiff  from  selling  and 
disposing  of  divers  and  very  many  trunks  and  boxes,  which  he 
otherwise  might  and  would  have  there  sold  and  disposed  of, 
&c.  General  demurrer  to  the  first  and  secwid  counts,  and 
joinder  therein. 

Taunton,  W.  E.,  in  support  of  the  demurrer. — The  agree- 
ment stated  in  the  first  and  second  counts  of  this  declaration, 
operates  in  general  restraint  of  trade,  and  is,  therefore,  void, 
or  it  is  an  agreement  for  a  partial  restraint,  without  a  sufficient 
consideration.  From  the  recitals,  it  appears  to  have  been  the 
object  of  the  parties,  to  avoid  the  inconveniences  they  ex- 
perienced, as  competitors,  from  underselling  each  other,  which, 
however,  although  a  loss  and  a  prejudice  to  them,  was  a  benefit 
to  all  the  subjects  of  the  realm.  The  intent  of  each  party  is,  to 
monopolize  the  business  of  a  box-maker,  and  to  secure  to  him- 
self an  exclusive  sale  in  the  particular  district  marked  out  on 
the  map;  and,  for  this  purpose,  each  engages  not  to  manufac- 
ture or  sell  goods,  or  to  aid  other  persons  in  manufacturing  or 
selling  goods,  to  be  sent  into  the  districts  of  the  other  parties, 
and  not  to  travel  into  those  districts.  They  are  not  to  purchase 
tea  chests  in  Oxford  at  a  higher  price  than  is  agreed  upon; 
and,  if  they  meet  with  any  opposition,  they  are  to  concert 
measures  for  their  own  benefit.  All  these  stipulations  are  in- 
consistent with  the  policy  of  the  law;  and  the  combination  is 
illegal.  Now,  it  is  quite  clear,  that  any  agreement  for  the  total 
restraint  of  trade,  that  is  to  say,  an  agreement  whereby  an 
individual   is  restrained   from  trading  throughout  the   whole 


THE  COMMON  LAW  89 

realm,  during  his  life,  is  bad;  but  it  is  conceded,  that  a  partial 
restraint  may  be  good,  provided  there  is  sufficient  legal  con- 
sideration. This  distinction  has  been  long  admitted  and  acted 
upon.  Prugnell  v.  Goss,  All.  67,  Broad  v.  Jollyfe,  Cro.  Jac. 
596,  Anonymous,  Moore,  114,  2  Wms.  Saunders,  156,  n,  1.  In 
Claygate  v.  Batchelor,  Ow.  143,  S.  C.  Cro.  Eliz.  872,  it  was 
held,  that  the  condition  of  a  bond,  restraining  an  apprentice 
from  using  the  trade  of  a  haberdasher  within  the  county  of 
Kent  and  the  cities  of  Canterbury  and  Rochester,  for  the  space 
of  four  years,  was  against  law.  Three  reasons  are  assigned  for 
this  judgment:  "It  is  against  the  liberty  of  a  freeman,  and 
against  the  statute  of  Magna  Charta,  cap.  20,  and  is  against 
the  commonwealth.  And  Anderson  said,  that  he  might  as  well 
bind  himself  that  he  would  not  go  to  church."  This  decision 
is  noticed  by  Parker,  L.  C.  J.,  in  his  judgment  in  Mitchel  v. 
Reynolds,  1  P.  Wms.  181,  wherein  all  the  law  upon  this  subject 
is  fully  explained.  In  Comyns's  Digest,  Tit.  "Trade"  (D.), 
all  the  cases  are  collected,  and  the  author  lays  it  down,  on  his 
own  authority,  that  "an  obligation  or  promise,  which  restrains 
the  total  use  of  a  man's  trade  for  four  years,  will  be  void." 
In  Davenant  and  Hurdis,  cited  in  the  Case  of  Monopolies,  11 
Rep.  86,  an  ordinance  by  the  company  of  Merchant  Tailors  of 
London,  directing  that  every  brother  of  the  society  should  put 
out  one-half  of  his  clothes  to  some  brother  of  the  said  society, 
who  exercised  the  art  of  a  cloth-worker,  was  declared  to  be 
against  the  common  law  and  the  freedam  of  the  subject,  and 
was,  therefore,  adjudged  void.  In  that  case,  nothing  operated 
to  the  total  restraint  of  trade,  inasmuch  as  the  ordinance  re- 
lated only  to  the  brothers  of  the  society.  [Hullock,  B. — But 
there  was  no  consideration  for  the  partial  restraint.]  There 
was  a  latent  consideration  arising  from  the  obedience  due  from 
every  member  to  the  laws  of  the  company,  and  an  indirect 
benefit  springing  out  of  this  by-law.  The  result  of  the  decisions 
relative  to  the  adequacy  of  the  consideration  is,  that  there  must 
be  an  extrinsic,  foreign  and  collateral  consideration,  dehors  the 
instrument,  and  not  merely  such  as  arises,  as  in  this  ease,  only 
upon  the  face  of  the  instrument  itself.  That  was  the  case  in 
Horner  v.  Ashford,  3  Bing.  322  (E.  C.  L.  R.  vol.  11).  But, 
supposing  that  is  not  necessary,  the  only  consideration  here 
expressed  amounts  to  an  illegal  combination  between  the  three 


90      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

parties,  to  obtain  a  monopoly  in  their  trade,  throughout 
England.  Such  a  combination,  if  good  in  the  ease  of  three 
persons,  must  be  equally  so  with  regard  to  any  number.  Thus, 
the  brewers  or  distillers  in  London  might  enter  into  a  similar 
agreement  to  divide  the  Metropolis  into  districts,  the  effect  of 
which  might  be  to  supply  the  public  with  a  commodity  prepared 
with  inferior  ingredients,  at  a  higher  price. 

Cross,    G.    R.,    cmitra. — The   law   is   correctly    stated,   when 
it   is  said,   that  no  consideration   can   support  an   agreement 
operating  as  a  general  restraint  of  trade.     Here,  however,  the 
restraint  contemplated  is  not  general,  but  confined  to  particular 
limits;  and  there  is  also  an  adequate  and  good  consideration. 
The  judgment  in  Mitchel  v.  Reynolds,  10  Mod.   130,   and  all 
the  antecedent  cases  there  referred  to,  clearly  establish,  that  a 
contract,  not  to  exercise  a  trade  within  a  particular  place  or 
parish,  is  good,  if  made  upon  a  fair  and  just  consideration. 
That  judgment  also  shows,  that  it  is  no  good  objection  to  a 
voluntary  restraint,  that  it  is  against  Magna  Charia,  or  the 
liberty  of  the   subject,   for  "Magna   Ckarta   provides   against 
force  and  power,  and  not  the  voluntary  acts  of  men ;  and  if  I 
sell  my  liberty  to  trade,  it  is  no  longer  mine,  but  his  to  whom 
I  sell  it."     (10  Mod.  134.)     In  Colmer  v.  Clark,  7  Mod,  230,  a 
bond,  restraining  the  obligor  from  carrying  on  his  trade  within 
the  city  and  liberty  of  Westminster  and  the  bills  of  mortality, 
for  a  limited  time,  was  held  good  in  law,  the  restraint  from  the 
exercise  of  trade  being  confined  to  a  particular  district,  and 
founded  on  a  valid  consideration.     The  case   of   Chesman  v. 
Nainby,  2  Stra.  739,  S.  C.  Lord  Raym.  1456,  S.  C.  Bro.  Pari. 
Ca.  349,  was  an  action  on  a  bond  conditioned  not  to  set  up  the 
trade  of  a  linen-draper,  or  to  assist  or  instruct  any  other  person 
in  the  managing  and  carrying  on  of  that  trade,  within  the  space 
of  half  a  mile  from  the  plaintiff's  dwelling-house,  or  of  any 
other   house,   to   which   she,   her   executors   or  administrators, 
might  think  fit  to  remove.     This  bond  was  held  to  be  valid,  and 
the  plaintiff  obtained  judgment,  which  was  affirmed  on  error. 
In  like  manner,  in  Davis  v.  Mason,  5  Term.  Rep.  118,  a  bond, 
not  to  practice  as  a  surgeon,  for  fourteen  years,  within  ten 
miles  of  the  town  of  Thetford,  where  the  plaintiff  lived,  was 
held  good,  although  it  was  objected  that  the  limits,  as  to  time 


THE  COMMON  LAW  91 

and  place,  were  tinreasonable.  Lord  Kenyon,  C.  J.,  in  that 
case,  observed:  "I  do  not  see  that  the  limits  are  necessarily 
unreasonable,  nor  do  I  know  how  to  draw  the  line.  Neither 
are  the  public  likely  to  be  injured  by  an  agreement  of  this 
kind,  since  every  other  person  is  at  liberty  to  practice  as  a 
surgeon  in  this  town."  This  last  observation  applies  forcibly 
to  tlie  agreement  now  in  question,  inasmuch  as  every  other  box- 
maker  is  at  liberty  to  carry  on  business  in  any  of  the  districts 
to  which  the  agreement  is  referable.  Nor  is  the  consideration 
insufficient  or  invalid.  "A  consideration  of  loss  or  inconven- 
ience, sustained  by  one  party  at  the  request  of*  another,  is  as 
good  a  consideration  in  law  for  a  promise  by  such  other,  as  a 
consideration  of  profit  or  convenience  to  himself." — Per  Lord 
ExiiENBOROUGH,  C.  J.,  in  Bunn  v.  Guy,  4  East,  190-4.  Here, 
then,  there  appears,  upon  the  face  of  the  agreement,  to  be  a 
benefit  obtained  by  the  defendant,  and  a  loss  incurred  by  the 
plaintiif,  at  the  same  time  that  the  public  will  not  be  deprived 
of  the  advantages  arising  from  the  competition  of  other  box- 
makers,  and,  it  is  to  be  presumed,  will  obtain  boxes  and  trunks 
cheaper  from  these  three  parties,  by  reason  of  the  deduction  of 
two-thirds  from  the  expenses  of  traveling.  The  stipulation  of  the 
parties  to  aid  and  assist  each  other,  is  nothing  more  than  is  com- 
monly undertaken  by  all  partners,  and,  therefore,  cannot  vitiate 
the  contract. 

Taunton,  in  reply. — It  is  the  policy  of  the  law  to  support 
the  freedom  of  trade;  and,  therefore,  all  contracts  imposing 
particular  restraints,  are,  prima  facie,  presumed  to  be  void. 
In  former  times  they  were  looked  upon  by  the  Courts  with 
great  jealousy,  as  appears  from  the  strong  expressions  of  Judge 
Hall  (2  H.  5,  f.  5)  :  ''A  ma  intent  vous  purres  aver  demurre 
sur  Ivy  que  le  obligation  est  void,  eo  que  le  condition  est 
encountre  common  ley,  et  per  Dieu  si  le  plaintiff  fuit  icy,  il 
irra  at  prison  tanq:  ill  ust  fait  fine  au  roy."  In  all  the  cases 
cited  there  was  an  extrinsic  consideration,  independent  of  the 
agreement,  and  a  loss  and  benefit  before  the  agreement  was 
entered  into,  as  in  the  ordinary  instances  of  a  tradesman  giving 
up  the  good-will  of  his  business  to  his  shopman  or  apprentice. 

GARROW,  B. — This  question,  as  it  appears  to  me,  is  confined 
within  a  narrow  compass;  and,  as  we  have  all  formed  the  same 


92      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

opinion,  I  shall  state  my  view  of  it  very  shortly.  The  principles 
upon  which  the  decisions  upon  subjects  of  this  nature  are 
founded,  have  been  accurately  stated;  and,  indeed,  have  so 
frequently  and  so  long  been  acted  upon,  that  they  are  now 
indisputable.  A  general,  universal,  restraint  of  trade,  inas- 
much as  it  affects  the  public  property,  and  the  interests  of  the 
community,  is  bad;  and  those  to  whose  interests  it  more 
immediately  relates,  cannot  make  it  good  by  any  consideration 
passing  between  themselves.  But,  it  is  submitted,  that  there 
may  be,  upon  a  good  consideration,  a  partial  restraint  of  trade ; 
and  that  an  agreement  for  that  purpose  is  sustainable,  and  has 
been  sustained.  The  legality  of  a  partial  restraint  of  trade  has 
been  established  in  a  variety  of  cases;  and  the  general  trans- 
actions of  mankind  furnish  daily  instances  of  its  existence. 
Without  resorting  to  the  aid  of  black  cotton  lines,  in  order  to 
divide  all  England  into  districts,  there  is  no  man  engaged  in 
trade  who  does  not,  in  effect,  impose  some  restraint  upon  him- 
self in  point  of  practice,  by  confining  himself  within  a  particular 
district,  and  circumscribing  his  trade  within  certain  bounds. 
It  has  been  supposed  that  the  public  are  interested  in  preclud- 
ing the  parties  from  entering  into  the  agreement  now  in 
question;  but,  I  think  it  very  doubtful,  whether  the  benefit  of 
the  public  would  be  best  consulted  by  these  three  persons 
continuing  to  travel  over  the  whole  country,  or  by  each  con- 
fining himself  to  the  district  marked  out  in  the  map.  Let  us 
see  what  is  the  case  now  presented.  It  appears,  according  to 
the  recital  in  the  agreement,  that  these  three  persons,  in  carry- 
ing on  their  business  of  box-makers,  had  traveled  into  various 
parts  of  the  country  to  vend  their  boxes  and  trunks,  and  had 
sustained  great  loss  and  inconvenience  by  reason  of  exercising 
their  trade  in  the  same  places.  This  is  the  mischief  and  evil 
recited  in  the  agreement ;  and  what  is  the  remedy  they  propose  ? 
Not  a  monopoly,  except  as  between  themselves;  because  every 
other  man  may  come  into  their  districts  and  vend  his  goods: 
all  they  propose  is,  that  they  shall  not  carry  on  a  rivalry,  nor 
continue  any  longer  to  trade  throughout  the  country.  This, 
then,  is  only  a  partial  restraint  of  trade.  But,  it  is  said  that, 
admitting  that  to  be  so,  there  is  no  consideration  extrinsic  of 
the  agreement  itself;  and  that  argument  is  illustrated  by  the 
cases  of  a  master  giving  up  his  business  to  his  apprentice  or  to 


THE  COMMON  LAW  93 

his  jonrneyman.  It  strikes  me,  however,  that,  in  the  present 
case,  there  is  as  good  a  consideration  as  in  either  of  those  al- 
luded to.  Each  party  here,  before  the  agreement  is  entered 
into,  has  a  trade  in  all  the  districts;  and  he  agrees  to  retire, 
and  to  relinquish  that  trade  in  two  of  those  districts,  in  order 
to  secure  the  others  in  undisturbed  possession.  An  objection  is 
then  made  to  that  part  of  the  agreement,  by  which  it  is  stip^ 
ulated,  that,  in  case  other  persons  shall  begin  to  trade  as  box- 
makers  in  any  of  the  districts,  the  parties  shall  meet  to  devise 
means  to  promote  their  own  views.  What  those  means  may  be, 
it  is  unnecessary  to  surmise;  but  we  cannot  presume  that  they 
xviU  be  illegal;  and,  therefore,  this  stipulation  does  not  affect 
the  validity  of  the  agreement. 

HULLOCK,  B. — I  think  this  demurrer  ought  to  be  disallowed. 
The  question  is  properly  stated,  when  it  is  said  to  be,  whether 
there  be  a  sufficient  conaderation.  It  is  conceded  that  there 
may  be  an  agreement  for  a  partial  restraint  of  trade,  provided 
there  be  a  good  consideration.  This  doctrine  is  to  be  found  in 
Comyns's  Digest,  and  is  laid  down  in  all  the  cases  cited  in  the 
argument;  and  the  question  is  said  by  Lord  Kenyon,  in  Davis 
V.  Mann,  5  East,  120,  to  have  been  at  rest  ever  since  the  case 
of  Mitchel  v.  Reynolds.  I  do  not  understand  the  principle 
upon  which  it  is  argued,  that  there  is  here  no  consideration, 
because  it  is  not  extrinsic  or  foreign  to  the  instrument.  The 
law  makes  no  distinction  of  that  kind,  but  looks  whether  there 
is,  upon  the  face  of  the  instrument,  a  good  and  valid  consid- 
eration, that  is  to  say,  either  a  benefit  to  one  party,  or  a  loss 
to  the  other.  Upon  that  rule  I  should  say,  that,  upon  the  face 
of  this  instrument,  there  is  a  sufficient  consideration.  But,  it  is 
said,  that  the  effect  of  this  a.greement  is  to  create  a  monopoly ; 
and  that,  by  upholding  its  validity,  we  shall  lead  to  other 
combinations  for  monopolizing  trades.  If  the  brewers  or  dis- 
tillers of  London  were  to  come  to  the  agreement  suggested, 
many  other  persons  would  soon  be  found  to  prevent  the  result 
anticipated ;  and  the  consequence  would,  perhaps,  be,  that  the 
public  would  obtain  the  articles  they  deal  in  at  a  cheaper  rate. 
Upon  the  whole,  then,  I  cannot  distinguish  this  case  from  any 
of  those  cited  in  which  an  agreement  for  a  partial  restraint  of 
trade  has  been  supported. 


94      COMBINATIONS  AND  RESTRAINT  OP  TRADE 

VAUGHAN,  B, — I  am  entirely  of  the  same  opinion.  The 
only  question  is,  whether  there  appears  upon  the  face  of  this 
agreement  a  sufficient  consideration  for  the  partial  restraint 
of  trade  it  contemplates.  In  consequence  of  the  loss  and  in- 
convenience which  it  is  recited  the  parties  has  before  sustained, 
they  entered  into  this  agreement,  by  which  the  loss  and  benefit 
to  each  is  reciprocal.  In  my  opinion,  this  was  an  honest  and 
upright  contract,  which  has  been  the  question  in  all  the  cases; 
and  a  contract  by  which  the  public  are  not  injured,  as  they 
may  be  supplied  upon  easier  terms. 

Judgment  for  the  plaintiff.  ^^ 

:>>^j^^-1srATI0NAL  BENEFIT   CO.   v.   UNION   HOSPITAL   CO. 

tM-    ^^^     (Supreme  Court  of  Minnesota,  1891.     45  Minn.  272.) 

fi^'*'^'    MITCHELL,  J.     This  appeal  is  from  an  order  overruling  a 
\     ^     ,         demurrer  to  the  complaint,  and  the  sole  question  is  whether  it 
■jK.tl'  **        appears  that  the  contract  declared  on  is  void  on  grounds  of 
'^^  ^^       public  policy  as  being  in  restraint  of  trade.     The  plaintitT,  an 
1^^  Illinois  corporation,  and  the  defendant,  a  "Wisconsin  corpora- 

■   .  I  tion,  were  each  organized  for  and  engaged  in  the  same  business, 

to- wit,  "issuing  and  selling,  to  such  persons  as  might  desire  to 
,0-  '  .  ,  purchase  the  same,  certifieates  entitling  the  holders  thereof, 
-.|>>-  when  sick  or  injured,  to  maintenance  and  to  medical  and  sur- 

gical care,  attention,  and  treatment  in  any  hospital  provided 
by  said  corporation,  and  to  such  support  during  the  time  said 
holders  might  be  confined  in  such  hospitals;  and  to  provide 
hospitals,  infirmaries,  and  such  other  places  as  might  be  neces- 
sary for  the  reception  of  the  holders  of  the  certificates  issued 
by  it  without  cost  other  than  the  cost  of  such  certificates."  The 
plaintiff  was  carrying  on  this  business  in  a  large  number  of  the 
states  of  the  Union,  and  had  established  a  large  and  lucrative 

16— Jones  v.  North,  L.  E.  19  Eq.  Co.   v.    Schoen,    77   Fed.   29    (where 

426    (association    of    quarrymen    by  each   party   gave   up   some   business 

which  all  sold  their  products  to  one  for  the  benefit  of  the  other  and  the 

who  was  to  sell  to  the  city,  and  the  covenant    of    one    party    was    held 

others  a^n'eed  not  to  sell  to  the  city.  legal). 
Held  legal) ;  Fox  Solid  Pressed  Steel 


THE  COMIION  LAW  95 

business  of  the  character  described  in  the  states  of  ^Minnesota 
and  Wisconsin  and  in  the  northern  peninsula  of  Michigan,  and 
had  acquired  many  valuable  contracts  with  hospitals  through- 
out that  territory  entitling  the  holders  of  its  certificates  to 
treatment  in  said  hospitals.  Thereupon  the  parties  entered 
into  the  contract  sued  on,  the  principal  features  of  which  were: 
(1)  That  the  plaintiff  company  agreed_to  jrefrain  for  the  term 
of_three  years  from  selling  certificates  in  the  states  of  Minne- 
sota, Wisconsin,  and  the  northern  peninsula  of  Michigan,  except 
to  railroad  employes.  (2)  The  plaintiff  also  agreed,  by  every 
proper  means  in  its  power,  to  secure  to  the  defendant  partici- 
pation in  all  contracts  and  arrangements  which  it  already  had 
within  that  territory  with  hospitals,  and  whenever  by  such 
contracts  it  had  the  exclusive  right  to  hospital  service,  so  far  as 
any  company  doing  the  same  business  was  coi>cemed,  it  would 
not  consent  to  the  substitution  of  parties  other  than  defendant. 
(3)  Tn  consideration  of  these  agreements  on  part  of  the  plain- 
tiff, the  defendant  agreed  to  pay  to  it  certain  sums  of  money, 
and  also  to  refrain,  during  said  term  of  three  years,  from  selling 
certificates  to  the  employes  of  any  railway  corporation  doing 
business  within  the  territorj^  mentioned.  The  business  carried 
on  by  these  two  companies  was  open  to  be  engaged  in  within 
this  territory  by  any  other  person  or  corporation  organized  for 
that  purpose. 

Shortly  stated,  the  legal  effect  of  this  contract  was  a  sale  by 
plaintiff,  for  a  valuable  consideration,  to  defendant,  of  its  busi- 
ness and  good-will  within  the  territory  mentioned  (except  the 
right  to  sell  certificates  to  railroad  employes),  with  a  stipulation 
that  it  would  refrain  from  engaging  in  such  business  within 
that  territory  for  three  years,  and  a  like  stipulation  on  part  of 
defendant  not  to  engage  in  the  department  of  the  business 
reserved  by  plaintiff.  It  will  be  observed  that  the  restriction 
is  not  general,  but  limited  both  as  to  space  and  time,  and  is  only 
coextensive  in  space  with  the  business  transferred.  Also,  that 
the  contract  does  not  require  either  company  to  wholly  refrain 
from  engaging  in  the  business  for  which  it  was  organized,  each 
remaining  free  to  engage  in  it  without  restriction  anywhere 
except  within  the  designated  territory;  and,  even  in  that,  each 
may  still  pursne  a  certain  department  of  such  business.  More- 
over, both  companies  are  purely  private  corporations,  organized 


96      COMBINATIONS  AND  RESTRAINT  OP  TRADE 

for  purposes  of  private  gain,  and  hence  not  cliarged  with  any 
public  duty.  Neither  one  nor  both  of  these  companies  have 
any  exclusive  right  to  engage  in  this  business,  it  being  one  open 
to  all;  hence  this  contract  does  not,  and  cannot,  create  any 
monopoly.  The  most  that  can  be  claimed  against  it  is  that  it 
reduces  by  one  the  number  of  competitors.  Nor  can  it  tend  to 
exclude  any  one  from  hospital  treatment,  its  only  effect  being 
to  reduce  by  one  the  number  of  companies  from  whom  persons 
desiring  to  secure  in  this  form  the  right  to  hospital  treatment 
could  purchase  these  "benefit  certificates." 

We  feel  safe  in  asserting  that  no  modem  decision  can  be 
found  holding  any  such  contract,  under  a  similar  state  of  facts, 
void  because  in  restraint  of  trade.  Formerly  in  England  the 
courts  frowned  with  great  severity  upon  eveiy  contract  of  this 
kind.  The  reasons  for  this  partly  grew  out  of  the  English  law 
of  apprenticeship,  by  which,  in  its  original  severity,  no  person 
could  exercise  any  regular  trade  or  handicraft  except  after 
having  served  a  long  apprenticeship.  Hence,  if  a  person  was 
prevented  from  pursuing  his  particular  trade,  he  was  practically 
deprived  of  all  means  of  earning  a  livelihood,  and  the  state  was 
deprived  of  his  services.-  No  such  reason  now  obtains  in  this 
country,  where  every  citizen  is  at  liberty  to  change  his  occu- 
pation at  will.  Moreover,  as  cheaper  and  more  rapid  facilities 
for  travel  and  transportation  gradually  changed  the  manner 
of  doing  business,  so  as  to  enable  parties  to  conduct  it  over  a 
vastly  great-er  territory  than  foraierly,  the  courts  were  neces- 
sarily compelled  to  readjust  the  test  or  standard  of  the  reason- 
ableness of  restrictions  as  to  place.  And  again,  modem 
investigations  have  much  modified  the  views  of  courts  as  well 
as  political  economists  as  to  the  effect  of  contracts  tending  to 
reduce  the  number  of  competitors  in  any  particular  line  of 
business.  Excessive  competition  is  not  now  accepted  as  neces- 
sarily conducive  to  the  public  good.  The  fact  is  that  the  early 
common-law  doctrine  in  regard  to  contracts  in  restraint  of 
trade  largely  grew  out  of  a  state  of  society  and  of  business 
which  has  ceased  to  exist,  and  hence  the  doctrine  has  been  much 
modified,  as  will  be  seen  by  comparison  of  the  early  English 
cases  with  modern  decisions — both  English  and  American.  A 
contract  may  be  illegal  on  grounds  of  public  policy  because  in 
restraint  of  trade,  but  it  is  of  paramount  public  policy  not 


THE  CO]\CVION  LAW  97 

lightly  to  interfere  with  freedom  of  contract.  It  is  unnecessary 
at  this  time  to  go  over  ground  so  often  traveled  by  others,  and 
enter  into  any  extended  consideration  of  the  decisions  on  this 
branch  of  the  law.  The  principal  cases  on  the  subject,  from 
the  Year  Books  down,  will  be  found  collated  in  2  Parsons  on 
Contracts,  748,  and  also  in  the  notes  to  Mitchel  v.  Reynolds,  1 
Smith,  Lead.  Cas.  (9th  Ed.)  694.  See,  also,  Alger  v.  Thacher, 
19  Pick.  51 ;  Match  Co.  v.  Roeber,  106  N.  Y.  473 ;  Beal  v.  Chase, 
31  Mich.  490;  and  Navigation  Co.  v.  Winsor,  20  Wall.  64. 

The  general  consensus  of  all  the  authorities,  at  least  the  later 
ones,  is  that  there  is  no  hard  and  fast  rule  as  to  what  contracts 
are  void  as  being  in  restraint  of  trade,  but  each  case  must  be 
judged  according  to  its  own  facts  and  circumstances;  that  a 
party  may  legally  purchase  the  business  and  trade  of  another 
for  the  very  purpose  of  removing  or  preventing  competition, 
coupled  with  an  undertaking  on  the  part  of  the  seller  not  to 
carry  on  the  same  business  in  the  same  place  or  within  the  same 
territory ;  and  the  question  of  the  reasonableness  of  the  restraint 
of  trade  depends  upon  whether  it  is  such  only  as  to  afford  a 
fair  protection  of  the  party  in  whose  favor  it  is  made;  and  the 
limits  of  restraint  as  to  space  depend  upon  the  kind  of  trade  or 
business  which  is  the  subject  of  the  contract.  Tested  by  these 
rules  we  find  nothing  legally  objectionable  in  the  contract  under 
consideration.  In  addition  to  C£ises  cited  above,  see,  also,  Moore 
&  H.  Hardware  Co.  v.  Towers  Hardware  Co.,  6  South.  Rep.  41. 
There  are  two  classes  of  cases,  some  of  which  appellant  has 
cited,  which  are  often  confounded  with,  but  are  clearly  dis- 
tinguishable from,  cases  like  the  present  and  stand  upon  an  I 
entirely  different  footing.  The  one  is  combinations  between 
producers  or  dealers  to  limit  the  production  or  supply  of  an 
article  so  as  to  acquire  a  monopoly  of  it  and  then  unreasonably 
enhance  prices.  The  other  is  where  a  corporation  of  a  quasi 
public  character  charged  with  a  public  duty,  as  a  railway 
company,  gas  company,  or  the  like,  enters  into  a  contract 
restrictive  of  its  business  which  would  disable  it  from  perform- 
ing its  duty  to  the  public.  Neither  of  these  elements  enters 
into  this  case. 

Order  affirmed. 

Vanderburgh,  J.,  did  not  sit. 

Kales  R.  of  T.  Vol.  1—7 


98      COMBINATIONS  AND  RESTRAINT  OF  TRADE 

UNITED    STATES    CHEMICAL   CO.    v.    PROVIDENT 
CHEMICAL  CO. 

^^K^^  '    (United  States  Circuit  Court,  Eastern  Distr.  of  Missouri.     64 
.^  Fed.  946.) 

'""^    ^V"  This  was  an  action  by  the  United  States  Chemical  Company 

.  '  ^    ■  against  the  Provident  Chemical  Company  for  rent,  on  a  lease. 

^       .       Trial  by  the  Court,  without  a  jury. 

^  X        '        Action  for  Rent.     Defense  that  the  lease  is  void,  because 
-^    ^^^    antagonistic  to  public  policy.     On  the  25th  of  September,  1888, 
^    \r^   ^the  plaintiff  company  leased  to  Henry  H.  Welch,  for  the  term 
\^>'*'"  of  10  years,  from  the  1st  of  September  of  that  year,  at  a  monthly 
^*^    .    ,     rental  of  $1,000  per  month,  in  advance,  the  building  and  equip- 
*'V^**^       ment  then  used  by  it  for  the  manufacture  of  bone  tartar  in 
^  Camden,  N.  J.     The  mutual  covenants  are  expressed  in  seven 

^  vA.       paragraphs.     The  first  stipulates   for  the   right  of  entry   for 

default  in  the  payment  of  rent,  and  is  of  the  usual  character. 
1  *''"'*'i^"  ,  The  second  prohibits  the  assignment   of  the   leasehold  or  an 
r^P'""'  underletting  without  the  written   consent  of  the  lessor.     The 
,  third  provides  that,  if  the  premises  be  destroyed  by  lire,  the 
^^^^  ^~^'     lessor  shall  have  20  days  within  which  to  elect  to  rebuild,  and, 
» » j^-       if  the  lessor  shall  choose  to  rebuild,   the   rental  should  then 
•  I     continue  for  a  period  of  three  months,  and  not  longer,  until  after 
t^  I  '^  '  the  complete  restoration  of  the  rebuilding,  when  it  would  again 

■^      f  revive.    If  the  lessor  elected  not  to  rebuild,  such  determination 

concluded  the  term.    The  fourth  is  a  covenant  that  in  the  event 
-^f'^'l"  the  buildings  should  be  destroyed  by  fire,  and  the  lessor  elect 

"U.*^  not  to  rebuild,  then  the  lessor  will  not  engage  in  the  manufac- 

^y^ji.^.s.^^'^       ture  of  bone  tartar  so  long  as  the  lessee  shall  continue  to  pay 
the  rental  of  $1,000.     The  fifth  assures  to  the  lessee  the  right  to 
M^""^        remove  any  engine,  boilers,  tools,  machinery,  or  fixtures  placed 
(^"^         upon  the  premises.     The  sixth  relates  to  the  prudent  use  of  the 
jj     Jj^/       premises,  so  as  not  to  increase  the  risk  by  fire,  and  restricts  the 
'v  K       employment  of  the  premises  to  the  manufacture  of  bone  tartar. 

•*^   ^         The  seventh   and  concluding  covenant  is  as   follows:     "Said 
rvvv^vt^*'    lessor,  for  itself,  its  successors  and  assigns,  hereby  covenants  to 
tj^o-^^'-     and  with  said  lessee,  his  heirs,  executors,  administrators,  and  as- 
signs, that  if  said  lessor  will  not,  during  the  period  that  this 
^    '""'^  lease  may  be  in  force,  and  that  the  rent  herein  reserved  shall 

*4^  u  be  paid  as  it  falls  due,  ever  manufacture  or  sell  any  bone  tar- 


THE  COMMON  LAW  99 

tar."  On  the  day  the  lease  was  executed,  it  was,  with  the 
consent  of  the  lessor,  assigned  to  the  defendant,  a  corporation 
organized  pursuant  to  the  laws  of  Missouri,  and  which,  for  many- 
years  antecedent,  had  been  engaged  in  the  manufacture  of  bone 
tartar  at  the  city  of  St.  Louis,  and  whose  trade  in  that  product 
extended  through  the  United  States,  wheresoever  there  was  a 
demand  for  that  article.  Although  the  lease  was  made  to  Mr. 
Welch,  it  was  understood  by  both  parties  that  he  was  merely 
the  representative  of  the  defendant  company,  whose  officers  had 
negotiated  and  consummated  the  terms  of  the  trade.  The  plain- 
tiff was  organized  as  a  corporation  under  the  laws  of  New 
Jersey,  and  had  for  a  number  of  years  been  engaged  in  manu- 
facturing various  kinds  of  chemical  compounds,  principally 
sulphuric  acid,  alum,  rock  tartar,  fertilizers,  and  latterly  bone 
tartar,  at  Camden,  N.  J.  It  used  a  separate  building  for  each 
of  the  different  kinds  of  its  products,  and  each  was  operated  by 
mechanical  power  derived  from  a  common  motor.  The  building 
which  the  defendant  leased  had  no  power,  and  unless  supplied 
with  engine,  as  seems  to  have  been  contemplated  by  paragraph 
5  of  the  lease,  or  power  rented  from  the  defendant,  would  be 
useless  for  the  manufacturing  purpose  for  which  it  had  been 
rented.  The  defendant  points  to  this  incident'  as  a  clear  indi- 
cation af  a  design,  of  which  both  parties  must  be  cognizant,  not 
to  employ  the  building  in  the  business  to  which  it  was  especially 
adapted,  but  to  close  it  up,  so  that  the  defendant  would  be  in 
complete  control  of  the  trade  in  bone  tartar.  And  there  is  some 
evidence  that,  in  conversations  attending  the  negotiations  which, 
culminated  in  the  lease,  the  defendant  expressed  an  intention 
not  to  operate  the  factory ;  ^d  also  that,  at  least  for  the  imme- 
diate future,  if  the  negotiations  were  concluded,  the  defendant 
would  have  complete  control  of  the  trade  in  the  bone  tartar 
commodity;  and  that  this  latter  feature  was  utilized  by  the 
plaintiff  to  obtain  the  rental  finally  agreed  upon. 

"Bone  tartar"  is  a  coined  term  for  the  chemical  compound 
"acid  phosphate  of  calcium,"  and  is  obtained  by  treating  cal- 
cined bone  or  fossil  and  kindred  rock  with  sulphuric  acid. 
Whether  made  of  bone  or  fossil  rock  is  not  discernible  in  the 
finished  product,  either  by  taste,  analysis,  or  effect  in  use.  Bone 
and  rock  tartar  are  indiscriminately  used  as  one  of  the  prime 
components  of  baking  powder.     It  was  the  trade  of  the  manu- 


100    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

facturers  of  baking  powder  that  the  defendant  had  been  culti- 
vating  for   years,    and   of   which,    so   far  as   bone    tartar,   its 
exclusive  product,  was  used,  it  had  almost  the  exclusive  patron- 
age up  to  the  time  when  the  plaintiff  began  to  produce  bone 
tartar.     The  plaintiff's  first  manufacture  of  said  phosphate  of 
calcium  was  from  rock,  but,  for  two  or  three  years  before  the  date 
of  the  lease,  it  had  added  to  its  works,  at  Camden,  the  building 
leased  to  the  defendant,  especially  adapted  to  the  making  of  bone 
tartar,  and  early  began  to  press  this  product  upon  the  market, 
in  competition  with  that  of  the  defendant,  and  threatening  to 
become  a  dangerous  rival.     The  defendant,  in  order  to  protect 
its  trade,  conceived  the  idea  of  perpetuating  its  regency  in  this 
particular   field   by    gaining   control    of   the    plaintiff's    works 
whereat  the  rival  product  was  made.     Its  efforts  resulted  in 
the  lease  which  is  the  basis  of  this  suit.     The  quality  of  the 
plaintiff's  bone  tartar  was  equal  to  that  of  the   defendant's. 
f  While  the  manufacture  of  acid  phosphate  of  calcium  was  open 
to  the  talent  and  capital  of  any  one,  yet,  to  successfully  make 
it,  great  skill  and  experience  were  required,  and  this  skill  had 
only  been  attained  by  the  plaintiff  and  defendant,  with  a  few 
unimportant  exceptions,  up  to  the  time  of  the  lease.     A  Mr. 
McNab  was  the  expert  in  charge  of  the  plaintiff's  works,  and, 
after  the  execution  of  the  lease,  the  defendant  requested  the 
plaintiff  to  endeavor  to  keep  him  in  its  employment  in  the 
other  departments  of  its  business,  so  that  he  might  not  engage 
in  starting  a  business  that  would  compete  with  the  defendant's; 
and  this  the  plaintiff,  in  a  spirit  of  accommodation,  consented, 
so  far  as  it  could  with  propriety,  to  do.     The  defendant,  after 
the  lease  was  made,  purchased  of  the  plaintiff  all  of  its  finished 
products,  both  of  rock  and  bone  tartar,  and  the  raw  material 
for  making  them.    The  raw  material  was  sent  to  the  defendant 's 
works  at  St.  Louis,  and  the  manufactured  sold  from  Camden 
to  customers,  including  those  who  had  been  purchasers  of  the 
plaintiff,  and  to  whom  the  plaintiff  used  its  best  endeavors  to 
introduce    defendant,    under   the   name    of   the   United    States 
Tartar  Company,  the  defendant  thinking  it  prudent  to  disguise 
the  fact  that  it  had  acquired  the  plaintiff's  factory  and  bone 
tartar  business.     The  value  of  the  leased  premises  is  shown  to 
be  between  $17,000  and  $24,000  and  the  annual  rental  to  be 
from  10  to  15  per  cent,  of  this  value,  while  the  rental  stipulated 


THE  COMJVION  LAW  101 

in  the  lease  is  $12,000  per  annum.  Inasmuch  as  the  lease  con- 
tains no  ^ant  of  the  good  will  of  the  plaintiff,  the  defendant 
contends  this  large  monthly  sum  is  but  the  price  which  the 
plaintiff  demanded  for  withdrawing  its  rivalry  to  the  defend- 
ant; while,  upon  the  other  hand,  the  plaintiff  contends  that  it 
is  but  a  fair  compensation  for  the  profit  it  had  been  realizing 
and  might  reasonably  anticipate  from  that  particular  branch 
of  its  business,  and  the  use  of  the  leased  property;  and  I  am 
convinced  of  the  accuracy  of  the  plaintiff's  contention  by  the 
evidence.  Up  to  May,  1893,  the  rental  was  promptly  paid  by 
the  defendant.  McNab,  without  the  connivance  of  the  plaintiff, 
had  left  its  employment,  and  had  started  a  factory  for  making 
bone  tartar.  Other  rival  institutions  sprang  up,  and  the  prices 
of  bone  tartar  were  tending  downward;  and  under  these  in- 
fluences the  defendant  repudiated  the  lease,  as  contrary  to  the 
policy  of  the  law.    The  plaintiff  sues  for  the  rent  in  arrear. 

PRIEST,  District  Judge  (after  stating  the  facts).  The 
question  of  moment  in  this  case  is  whether  the  seventh  covenant 
of  the  lessor,  not  to  manufacture  or  sell  any  bone  tartar  during 
the  period  the  lease  may  be  in  force,  is  in  restraint  of  trade, 
and  for  that  reason  void.  The  transaction  in  which  this  restric- 
tion appears  is  the  leasing  of  premises  and  equipment  esi>ecially 
devoted  to  the  manufacture  of  bone  tartar.  The  rental  value 
of  the  real  estate  and  buildings  was  between  $2,000  and  $2,500. 
The  profits  derived  by  the  plaintiff  from  making  and  sale  of 
bone  tartar  were  from  $10,000  to  $12,000  per  annum  at  the 
time  the  lease  was  made.  It  is  manifest  that  the  inducement 
moving  the  plaintiff  to  lease  the  premises  was  to  obtain  a  fixed 
and  certain  sum,  rather  than  a  contingent  and  uncertain  one; 
and  the  motive  of  the  defendant  was  to  get  rid  of  a  danger- 
ous and  aggressive  competitor  in  the  trade  of  the  article  of  which 
it  was  in  practical  control,  and  to  the  manufacture  of  which  it 
was  exclusively  devoted.  The  plaintiff  sought  a  trade  for  this 
article  throughout  the  United  States — an  achievement  which 
the  defendant  had  already  accomplished,  being  earlier  in  the 
field.  In  view  of  these  conditions,  is  the  covenant  condemned 
by  public  policy? 

The  restraint  extends  literally  everywhere,  but  a  fair  con- 
struction would  limit  it  to  the  United  States.     If  valid  to  that 


102    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

extent,  we  have  no  concern  with  the  broader  boundary.  It  is 
commonly  and  casually  said  that  contracts  in  general  restraint 
of  trade  are  void.  This  rule,  whatever  may  have  been  its 
earlier  character,  is  now  neither  arbitrary  nor  inflexible.  The 
sense  of  the  modern  decisions  is  that,  if  the  restraint  is  only 
commensurate  with  the  fair  protection  of  the  business  sold,  the 
contract  is  reasonable,  valid,  and  enforceable.  It  is  only  where 
the  restriction  can  be  of  no  avail  to  the  vendee,  and  unneces- 
sarily hampers  the  vendor,  that  it  becomes  oppressive  and  void. 
Fowle  V.  Park,  131  U.  S.  88;  Ellerman  v.  Stock-Yards  Co.  (N. 
J.  Ch.)-,  23  Atl.  287;  Long  v.  Towl,  42  Mo.  545;  Match  Co.  v. 
Roeber,  106  N.  Y.  473;  Lawson,  Cont.  §  327. 

Among  the  potent  reasons  first  assigned  against  such  con- 
tracts was  that  the  person  restrained  by  thus  surrendering  his 
chosen  occupation — one  for  which  he  had  been  especially  pre- 
pared— might  become  a  public  charge,  and  the  public  be  injured 
in  being  deprived  of  his  personal  skill  in  the  avocation  to  Avhich 
he  had  been  brought  up.  Such  reasons  cannot  be  applied,  to 
artificial  persons  without  absurdity.  The  substantial  ground  m 
all  cases,  especially  where  corporations  are  concerned,  is  that 
such  contracts  tend  to  create  monopolies.  In  discussing  this 
phase  of  the  subject,  we  must  not  lose  sight  of  some  other 
principles,  the  disregard  of  which  would  be  more  harmful  to 
public  interest  than  monopolies.  The  right  to  contract  is  a 
cardinal  element  of  constitutional  liberty,  and,  as  such,  should 
be  jealously  guarded.     In  one  of  the  cases  supra  it  is  said : 

"It  is  clear  that  public  policy  and  the  interest  of  society  favor 
the  utmost  freedom  of  contract  within  the  law,  and  require 
that  business  transactions  should  not  be  trammeled  by  unneces- 
sary restrictions.  'If,'  said  Sir  George  Jessell,  in  Printing  Co. 
V.  Sampson,  L.  R.  19  Eq.  462,  'there  is  one  thing  more  than  any 
other  which  public  policy  requires,  it  is  that  men  of  full  age 
and  competent  understanding  shall  have  the  utmost  liberty  of 
contracting,  and  that  contracts,  when  entered  into  freely  and 
voluntarily,  shall  be  held  good,  and  shall  be  enforced  by  courts 
of  justice.'  "    Match  Co.  v.  Roeber  (N.  Y.  App.),  13  N.  E.  422. 

Private  corporations  are  subject  to  the  control  of  the  states 
from  which  they  derive  their  charters.  From  an  abuse  or  mis- 
use or  excess  of  their  powers,  they  can  be  called  to  an  account 
by  the  state.    It  is  better  such  control  and  regulation  should  be 


THE  COMMON  LAW  103 

had  by  that  ample  authority  than,  indirectly,  by  a  foreign 
forum,  upon  collateral  questions  of  public  expediency.  The 
facts  of  this  case  disclose  no  tendency  to  monopoly.  Monopoly 
implies  an  exclusive  right,  from  which  all  others  are  debarred, 
and  to  which  they  are  subservient.  Greene's  Case,  52  Fed.  104. 
In  Match  Co.  v.  Roeber,  supra  (a  case  very  similar  in  facts  to 
this),  the  Court  observed: 

"To  the  extent  that  the  control  prevents  the  vendor  from 
carrying  on  the  particular  trade,  it  deprives  the  community  of 
any  benefit  it  might  derive  from  his  entering  into  competition. 
But  the  business  is  open  to  all  others,  and  there  is  little  danger 
that  the  public  will  suffer  harm  from  lack  of  persons  to  engage 
in  a  profitable  industry.  Such  contracts  do  not  create  monop- 
olies.    They  confer  no  special  or  exclusive  privilege." 

That  the  contract  in  this  case  was  ineffectual  to  create  a 
monopoly,  or  even  to  confer  a  dominating  control  over  the 
trade  in  bone  tartar,  is  confessed  to  some  extent  by  the  answer, 
wherein  it  assumes,  as  a  just  reason  for  repudiating  the  con- 
tract, competition  subsequently  started.  Acid  phosphate  of 
calcium  is  made  by  several  processes.  The  plaintiff  employed 
two — one  fram  rock,  and  the  other  from  bone.  It  leased  the 
plant  for  making  bone  tartar  only,  reserving  the  other.  The 
process  was  not  discernible  in  the  finished  product.  There  is 
nothing  in  the  contract  from  which  we  can  reasonably  infer  a 
tendency  to  create  a  monopoly  such  as  the  law  condemns.  Even 
if  an  article  be  of  prime  necessity,  the  public  is  not  concerned 
with  who  makes,  but  only  with  the  reasonableness  of,  the  price. 
But  it  is  said  that  the  defendant  had,  by  its  part  in  the  trans- 
action, such  a  purpose  in  view.  This  may  be.  The  intent  is 
only  condemned  as  it  is  manifested  in  an  unlawful  act.  If  a 
person  does  a  lawful  act  with  a  vicious  intent,  he  is  without  the 
pale  of  legal  punishment.  Whatever  may  have  been  the  de- 
fendant's motive,  and  even  if  reprehensible,  there  is  no  rule 
by  which  we  may  reprimand  the  plaintiff  for  the  defendant's 
evil  or  wrongful  intentions  or  acts.  Whether  the  defendant's 
purpose  is  condemned  by  law  or  not  does  not  affect  the  validity 
of  the  contract,  unless  plaintiff  contributed  something  more  to 
the  accomplishment  of  the  unlawful  design  than  the  mere  leas- 
ing of  its  property.  Labbe  v.  Corbett,  69  Tex.  503 ;  Tied.  Sales, 
§  294.     But  we  are  of  the  opinion  that  defendant  has   been 


104    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

hastily  and  unnecessarily  self -accusing.  The  plaintiff  was 
making  inroads  upon  the  defendant's  business,  and  greatly 
cutting  the  prices  of  its  sole  manufactured  product,  while  with 
the  plaintiff  this  product  was  but  a  single  feature  of  its  manu- 
facturing plant.  The  defendant  had  a  perfect  right  to  ])ny  off 
the  competition  of  a  dangerous,  powerful,  and  aggressive  rival. 
The  law  of  self-defense  and  protection  applies  to  one's  business, 
as  well  as  to  his  person.  But,  if  another  springs  up  in  the 
stead  of  the  one  silenced,  the  courts  cannot,  under  the  guise  of 
public  expedience,  relieve  him  from  the  improvidence  of  his 
first  contract. 

Our  attention  has  been  called  to  many  cases  which  condemn, 
in  perhaps  not  too  severe  terms,  combinations  and  trusts.  It  is 
a  nervous  and  alarmed  imagination  which  sees  in  every  transac- 
tion involving  large  exchange  of  properties  a  monster  threaten- 
ing public  interests.  Combinations  in  the  nature  of  modern 
trusts,  so  soundly  condemned,  are  those  which  aim  at  a  union 
of  energy,  capital,  and  interest  to  stifle  competition,  and  en- 
hance the  price  of  articles  of  prime  necessity  and  staples  of 
commerce.  In  such  cases  there  is  absent  the  element  of  exchange 
of  one  valuable  right  or  thing  for  another.  In  the  contract 
here  we  find  none  of  the  elements  of  a  combination  or  trust. 
It  is  a  simple  lease  and  sale  for  a  fair  and  reasonable  com- 
pensation, with  stipulations  only  commensurate  with  a  reason- 
able, necessary  protection.  The  effect  of  the  transaction,  while 
not  so  literally  expressed,  was  to  convey  with  the  premises  the 
good  will  of  the  plaintiff  in  its  bone  tartar  product  and  trade. 
It  is  both  unnecessary  and  unprofitable  to  discuss  the  many 
cases  cited  in  the  briefs.  Upon  a  topic  of  public  expedience, 
adjudications  are,  seemingly,  necessarily  inharmonious. 

Judgment  for  the  plaintiff  for  the  rent  sued  for,  and  6  per 
cent,  interest  upon  each  installmerit  from  the  date  it  became  due. 


f/    y  ^       ''^    THE  COMMON  LAW    '      '    ^    V     'lo5 

DUNBAR  V.  AMERICAN  TELEPHONE  AND  TELEGRAPH  ^-^  ^ 

COMPANY  4    cL.'^'^^y 

(Supreme  Court  of  IllinMS,  1909.     238  111.  456.)  ^  ^^^^^^ 

VICKERS,  J.    Francis  W.  Dunbar  and  others,  minority  stock- — .Z.-—- .. 
holders  ^"^  of  the  Kellogg  Switchboard  &  Supply  Company  (here-  lr^^/   '^■' 
inafter  called  the  "Kellogg  Company")  filed  a  bill  in  equity  in  i^ 

the  Circuit  Court  of  Cook  county  against  the  American  Tele-  . 

phone  &  Telegraph  Company  (hereinafter  called  the  "American      "    f 
Company"),  the  "Western  Electric  Company  (hereinafter  called  ..W^lto^  (r^^ 
the  "Electric  Company"),  the  Kellogg  Switchboard  &  Supply       ~ 
Company,  Milo  G.  Kellogg,  Wallace  De  Wolf,  and  others,  for      "^^   ^*^ 
the  purpose  of  having  a  sale  of  the  majority  of  the  stock  of  the  ^^a*-^^  ^ 
Kellogg   Switchboard   &   Supply    Company   made   by   Milo   G.  jZ^v^A     ^ 
Kellogg  and  others  to  the  American  Company  set  aside  and    ^^x^lc,^ 
held  for  naught,  and  for  an  injunction  and  other  relief.     Milo 
G.  Kellogg  answered  the  bill,  in  which  he  substantially  admitted     "^ 
all  its  averments,  and  filed  a  cross-bill,  in  which  he  repeated,       v***-***-*^- 
with  some  variations  and  additions,  the  substantial  averments  .,.^^f    J,^ 
of  the  original  bill,  and  prayed  that  the  pretended  sale  of  the  -^c^^  i^ 
capital  stock  held  by  him  in  the  Kellogg  Company  should  be     '^  ^^ 

adjudged  illegal  and  void  and  be  canceled  and  set  aside.    Some     --^    H.    *-*^ 
of  defendants  below  answered  both  the  bill  and  the  cross-bill,  z^^^/„4^^ 
while  others  demurred  to  both.     The  demurrers  were  sustained, 
and  the  bills  both  dismissed  for  want  of  equity.     This  decree  A"*"^*-*^  ^^ " 
was  affirmed  by  the  Appellate  Court,  but  upon  further  appeal  ^        >  eL 
to  this  court  the  decree  sustaining  the  demurrer  and  dismissing  ,.,  ,^ 

the  original  bill  was  reversed,  while  the  decree  dismissing  the 
cross-bill  on  demurrer  was  affirmed.     This  court  remanded  the  li-Uci     i^^T~' 
cause  to  the  Circuit  Court,  with  directions  to  proceed  in  con-  c.^  «avJ^ 
formity  with  the  views  of  this  court  expressed  in  its  opinion.       .  f 

Our  former  opinion  is  reported  as  Dunbar  v.  American  Tele-      ' 
phone  &  Telegraph  Co.,  224  lU.  9,  115  Am.  St.  Rep.  132.    Upon     •->-'-t-^ 
the  reinstatement  of  the  cause  in  the  Circuit  Court  most  of  the      ^sjMJ.*-^ 
defendants  who  had  not  already  filed  answers  answered  the  bill.    •■■-    j^^-x^Jr , 

17 — For    the    proposition    that    a  v.  American  Glucose  Co.,  182  111.  551,  ^    ^» 

minority   stockholder   may   maintain  625-633;  also  Bigelow  v.  Calumet  & 

a  bill  based  upon  the  illegal  acts  of  Hecla    Mining    Co.,    155    Fed.    869, 

the  corporation  in  becoming  a  party  post,  p.  1195,  and  cases  there  cited, 
to  an  illegal  combination:   Harding 


(M-v*. 


106    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Those  not  answering  were  either  mere  formal  parties,  or  parties 
whose  interests  were  represented  and  protected  by  the  answers 
filed.  After  the  issues  were  made  up  the  cause  Avas  heard  in  the 
Circuit  Court,  the  Hon.  Thomas  G.  Windes  presiding,  upon 
oral  evidence  taken  in  open  court,  except  certain  portions  of 
the  testimony  which  was  submitted  in  depositions.  The  findings 
of  the  Circuit  Court  were  that  the  allegations  of  the  bill  were 
substantially  true,  and  by  its  decree  the  purchase  of  the  stock 
of  the  Kellogg  Company  by  the  American  Company  was  de- 
clared void  and  of  no  effect,  and  the  relief  granted  was  such  as 
the  court  deemed  equitable,  proceeding  upon  the  assumption 
that  the  title  to  the  stock  of  the  Kellogg  Company  had  never 
passed  out  of  the  persons  who  made  the  alleged  sales  to  the 
American  Company.  The  scope  of  the  decree  of  the  Circuit 
Court,  both  in  its  findings  and  its  equity-adjusting  features, 
will  be  more  specifically  stated  hereinafter.  Upon  a  writ  of 
error  being  sued  out  of  the  Appellate  Court,  that  court,  while 
agreeing  in  the  main  with  the  Circuit  Court  in  its  findings,  dis- 
agreed with  the  relief  granted,  and  accordingly  reversed  the 
decree  and  remanded  the  cause  to  the  Circuit  Court,  with  direc- 
tions to  enter  a  decree  in  accordance  with  the  specific  directions 
expressed  in  the  opinion  of  the  Appellate  Court.  The  complain- 
ants in  the  original  bill  have  appealed  to  this  court,  and  here 
insist  upon  a  reversal  of  the  Appellate  Court  and  an  affirmance 
of  the  Circuit  Court.  Milo  G.  Kellogg  has  assigned  cross-errors, 
as  have  also  the  American  Company  and  Enos  M.  Barton.  The 
cross-errors  assigned  by  Kellogg  do  not  materially  differ  from 
the  errors  assigned  by  appellants,  while  the  cross-errors  assigned 
by  the  American  Company  and  Barton  bring  in  question  the 
decree  of  the  Circuit  Court. 

Upon  the  former  hearing  of  this  cause  in  this  court  the  sub- 
stance of  the  bill  filed  by  appellants  was  set  out  in  the  state- 
ment preceding  the  opinion.  Since  the  American  Company  and 
others  question  by  cross-errors  the  sufficiency  of  the  evidence  to 
support  appellants'  bill,  it  will  be  necessary  to  restate  the  essen- 
tial features  of  the  bill  upon  which  the  cause  was  finally  heard. 

Appellants  allege  in  their  amended  and  supplementary  bills 
that  the  Kellogg  Company  was  an  Illinois  corporation,  organized 
for  the  purpose  of  manufacturing,  selling,  hiring,  leasing,  or 
otherwise   procuring,   owning,   and   disposing  /)f,   electric  tele- 


THE  COMMON  LAW  107 

phone  and  telegraph  instruments  of  all  kinds;  that  the  capital 
stock  consisted  of  5,000  shares,  of  $100  each;  that  Wallace  L. 
De  Wolf  was  the  president,  E.  H.  Brush  the  vice  president,  and 
Leroy  D.  Kellogg  the  secretary  and  treasurer  of  the  company; 
that  upon  its  organization  Milo  G.  Kellogg  became  the  prin- 
cipal stockholder,  owning  about  two-thirds  of  the  capital  stock. 
It  is  further  alleged  that  the  American  Company  was  a  corpora- 
tion organized  under  the  laws  of  New  York,  and  was  doing 
business  in  this  state  and  most  of  the  other  states  of  the  Union ; 
that  said  last-named  company  had  become  the  owner  of  the 
business  and  stock  of  the  American  Bell  Telephone  Company 
of  Boston,  and  that  F.  P.  Fish  was  its  president;  that  the 
American  Company  was  the  owner  of  a  large  amount  of  stock 
of  numerous  licensee  or  subsidiary  telephone  companies,  and 
operated  a  large  system  of  telephone  and  telegraph  lines  in  the 
United  States;  that  said  American  Company  owned  a  majority 
of  the  capital  stock  of  the  Electric  Company ;  that  said  corpora- 
tion and  the  Electric  Company  formed  what  is  known  as  the 
"Bell  Telephone  Monopoly,"  which  for  many  years  had  exclu- 
sive control  of  the  business  in  the  United  States  as  to  the  use 
of  both  telephone  and  telegraph  apparatus,  due  to  the  numerous 
patents  owned  and  controlled  by  said  American  Company ;  that 
the  president  of  the  American  Company  is  also  a  director  of  the 
Electric  Company;  that  the  Electric  Company  is  an  Illinois 
corporation,  engaged  in  the  manufacturing,  buying,  and  selling 
of  electric  apparatus  used  in  the  construction,  operation,  and 
maintenance  of  telephone  and  telegraph  systems;  that  E.  M. 
Barton  is  president  of  s£dd  Electric  Company,  and  that  he  is 
dominated  by  Fish  and  the  American  Company  through  the 
latter 's  control  of  the  board  of  directors  of  said  Electric  Com- 
pany. It  is  further  alleged  in  the  bill  Uiat  telephones,  switch- 
boards, and  instruments  and  other  apparatus  of  the  independent 
telephone  companies  throughout  the  United  States  have  been 
manufactured  by  a  number  of  companies,  the  most  important 
of  which  are  the  Kellogg  Company  and  the  Stromberg-Carlson 
Company,  both  of  which  are  located  in  Chicago,  and  each  of 
which  exceeds  in  capacity  the  business  of  any  other  telephone 
manufacturing  company  in  the  United  States  except  the  Electric 
Company;  that  tJie  business  of  the  Kellogg  Company  exceeded 
that   of   the   said    Stromberg-Carlson    Company    in  supplying 


108    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

switchboards  and  other  apparatus  for  the  larger  independent 
exchanges  throughout  the  country;  that,  in  consequence  of  the 
conditions  and  circumstances  thus  stated,  it  is  charged  in  the 
bill  that  in  order  to  stifle  competition  and  create  a  monopoly  in 
itself  and  its  licensee  companies,  and  to  enable  them  to  exact 
unreasonable  and  excessive  rates  and  charges,  the  American 
Company  conceived  the  illegal  purpose  of  acquiring  at  least 
two-thirds  of  the  stock  of  the  Kellogg  Company,  and  through 
said  ownership  to  elect  and  maintain  a  board  of  directors  which 
should  not  act  in  the  real  interest  of  the  Kellogg  Company,  but 
in  the  interest  of  and  subservient  to  the  interest  of  the  American 
Company,  and  thereby  free  that  company  and  its  licensees  from 
the  competiticm  of  the  Kellogg  Company  and  independent  ex- 
changes. The  bill  charges,  on  information  and  belief,  the  method 
that  said  American  Company  contemplated  adopting  to  accom- 
plish its  unlawful  purpose.  The  bill  then  sets  out  the  circum- 
stances under  which  the  American  Company  acquired,  by 
purchase  from  De  Wolf,  an  agent  of  Milo  G.  Kellogg,  3,307  shares 
of  the  Kellogg  Company  stock,  and  the  acquirement,  with  like 
unlawful  purpose,  of  1,004  other  shares  of  stock  from  other 
stockholders  in  the  said  Kellogg  Company.  The  bill  charges 
that  these  purchases  were  made  by  Barton,  president  of  the 
Electric  Company;  that  the  money  to  pay  for  said  stock  was 
furnished  by  the  American  Company,  and  that  the  stockholders 
of  the  Kellogg  Company  of  whom  these  shares  were  purchased 
by  Barton  were  ignorant  of  the  fact  that  they  were  selling  to 
the  American  Company.  It  is  charged  that,  by  the  contract 
entered  into  between  De  Wolf  and  Barton  in  regard  to  the  sale 
of  the  Kellogg  shares.  Barton  agreed  to  pay  $45  per  share  in 
cash  upon  the  delivery  of  the  certificates,  and  also  to  pay,  in 
addition,  per  share,  the  proceeds  of  any  and  all  bills  and  ac- 
counts receivable  due  and  owing  to  said  Kellogg  Company  on 
December  1,  1901,  amounting  to  $323,248.09,  as  the  same  are 
paid  and  collected;  that  it  was  also  agreed  that  the  business  of 
the  Kellogg  Company  should  be  carried  on  in  the  usual  manner 
for  the  space  of  one  year;  that  these  transactions  were  all  con- 
summated while  Milo  G.  Kellogg  was  in  California  on  account 
af  ill  health,  and  without  his  knowledge  or  personal  participa- 
tion therein,  and  that  as  soon  as  he  learned  of  said  sale  he 
heartily  disapproved  thereof  and  sought  in  every  way  to  repur- 


THE  COM^ION  LAW  109 

chase  his  stock,  in  order  that  the  Kellogg  Co-mpany  might  be 
managed  in  the  interest  of  its  stockholders  and  not  be  used  as 
an  instrument  to  create  and  perpetuate  in  the  American  Com- 
pany a  monopoly  of  the  telephone  business;  that  Barton  and 
Fish,  while  willing  to  sell  a  portian  of  said  stock,  insisted  upon 
retaining  two-thirds  thereof.  The  bill  further  charges  a  series 
of  acts  done  by  Barton  through  the  officers  and  agents  that  had 
been  placed  in  control  of  the  Kellogg  Company  through  the 
control  it  had  acquired  of  a  majority  of  the  Kellogg  Company 
stock,  all  of  which  acts  are  charged  to  be  in  furtherance  of  the 
illegal  purpose  of  the  American  Company  to  disorganize  and 
dissolve  the  Kellogg  Company.  The  prayer  of  the  bill  was  that 
a  temporary  injunction  might  issue,  which,  upon  final  hearing, 
should  be  made  perpetual,  restraining  the  American  Company, 
Barton,  Fish,  and  the  Electric  Company  from  selling  or  other- 
wise disposing  of  the  shares  of  stock  which  they  held  in  the 
Kellogg  Company,  aggregating  4,311  shares;  that  a  meeting  of 
the  stockliolders  be  convened,  under  the  direction  of  the  court, 
for  the  election  of  a  new  board  of  directors,  and  that  the  holders 
of  the  stock  in  question  be  enjoined  from  voting  in  said  meeting 
any  of  said  shares  of  stock,  and  that  the  said  American  Com- 
pany, Barton,  Fish,  the  Electric  Company,  and  all  of  their 
ofiScers  and  agents,  be  enjoined  from  attempting  to  dissolve  or 
otherwise  interfere  with  the  interest  and  business  of  the  Kel- 
logg Company,  and  that  the  sale  of  the  shares  of  stock  in  the 
Kellogg  Company  to  the  American  Company  be  set  aside  and 
held  for  naught. 

By  a  second  supplemental  bill  filed  by  Francis  W.  Dunbar, 
Kempster  B.  Miller,  and  George  L.  Burlingame  it  is  charged 
that  in  January,  1907,  the  meeting  of  stockholders  of  the  Kel- 
logg Company  was  held  in  Chicago ;  that  all  the  stock  of  said 
company  was  represented  at  the  said  meeting  either  by  owners 
or  proxies,  and  that  Milo  G.  Kellogg  attended  said  meeting  and 
nominated  for  election  a  board  of  directors  consisting  of  Dun- 
bar, Miller,  Burlingame,  Milo  G.  Kellogg,  Leroy  D.  Kellogg, 
Edwards,  and  James  G.  Kellogg,  and  that  one  Charles  S.  Holt 
nominated  the  following  board  of  dli-ectors:  Buckingham, 
Brush,  Hanford,  Dommerque,  De  Wolf,  Edwards,  and  Coffeen; 
that  votes  were  cast  for  the  directors  as  above  named,  by  Milo 
G.  Kellogg  3,405  shares,  and  by  other  persons,  making  a  total 


110    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  3,736  shares  out  of  4,970  shares  present,  and  that  said  board 
of  directors  were  duly  declared  elected  by  Dunbar;  that  De 
Wolf,  as  president,  presided  at  the  said  meeting;  that  Charles 
S.  Holt,  counsel  for  the  American  Company,  was  present,  and 
claimed  to  be  the  proxy  and  owner  of  3,305  shares  of  the  3,405 
shares  so  owned  and  voted  by  Milo  G.  Kellogg  in  person;  that 
said  De  "Wolf,  acting  in  the  interest  of  the  American  Company 
and  the  Electric  Company,  refused  to  recognize  the  vote  of  Milo 
G.  Kellogg  in  respect  to  3,305  shares  of  stock,  and  claimed  and 
pretended  that  the  directors  so  chosen  were  not  elected,  but  that 
in  their  place  and  stead  the  second  set  of  nominees  were  elected, 
and  that  said  second  set  of  directors,  other  than  Edwards,  under 
the  direction  of  the  American  Company,  the  Electric  Company, 
and  Fish  and  Barton,  have  assumed  and  pretended  to  be,  and 
have  acted  as,  the  directors  of  said  Kellogg  Company.  It  is 
averred  that  Milo  G.  Kellogg  was  the  owner  of  and  entitled  to 
vote  the  3,305  shares  of  stock,  and  that  the  vote  of  such  stock  by 
Holt  was  void  and  of  no  effect.  Said  supplemental  bill  prays 
that  Dunbar,  Miller,  Burlingame,  Milo  G.  Kellogg,  Leroy  D. 
Kellogg,  James  G.  Kellogg,  and  Edwards  may  be  declared  elected 
and  to  constitute  the  duly  elected  board  of  directors  of  the  Kel- 
logg Company,  and  prays  for  an  injunction  against  all  persons 
interfering  with  the  exercise  oi  their  duties  as  such  board.  Sub- 
sequently, by  amendment  and  supplemental  bill,  it  was  charged 
that  on  the  19th  day  of  December,  1906,  the  Kellogg  Company 
declared  a  dividend  of  50  per  cent  upon  all  its  capital  stock,  and 
that  said  company  on  that  date  paid  to  such  American  Company 
a  dividend  amounting  to  $215,550  upon  4,311  shares  of  stock  of 
said  Kellogg  Company.  The  American  Company  denied,  by 
supplemental  answer,  that  it  had  received  a  50  per  cent,  dividend, 
or  a  dividend  of  any  per  cent,  or  any  amount,  on  any  shares  of 
stoek  of  the  Kellogg  Company.  A  plea  was  interposed  setting 
up  the  dismissal  of  the  cross-bill  and  the  affirmance  thereof  by 
this  court  as  an  adjudication  that  Milo  G.  Kellogg  was  not  the 
owner  nor  entitled  to  said  shares  of  stock,  and  for  that  reason 
was  not  entitled  to  vote  said  shares  at  the  stockholders'  meeting 
on  January  15,  1907. 

The  foregoing  statement  is  sufficient  to  show  the  general 
character  of  the  bill.  The  findings  and  decree  of  the  Circuit 
Court  may  be  summarized  as  follows:    After  reciting  in  detail 


THE  COMMON  LAW  111 

the  averments  of  the  bill  and  finding  the  facts  substantially  as 
therein  charged  to  be  true,  and  specifically  finding  that  the  pre- 
tended purchase  of  4,311  shares  of  stock  by  the  American  Com- 
pany, in  its  necessary  operation  at  the  time  it  was  made  tended 
and  tends  to  materially  suppress  competition  and  creates  in  said 
American  Company  and  its  licensee  companies  a  monopoly  in 
the  rendering  of  telephone  service  to  the  public  throughout  the 
United  States  and  in  the  different  cities  and  other  places  thereof, 
and  that  it  was  the  intention  and  purpose  of  said  American 
Company,  in  making  each  of  the  pretended  purchases  of  said 
shares  of  stock,  to  so  restrict  and  suppress  competition  in  said 
telephone  service  and  create  in  itself  a  monopoly  in  said  service, 
and  that  said  attempted  purchases  of  stock  by  the  American 
Company  were  contrary  to  the  public  policy  of  the  state  of  Illi- 
nois and  void,  the  decree  finds  that  no  title  to  said  stock  passed 
thereby  from  any  of  said  sellers  to  said  American  Company  or 
to  said  Barton,  but  that,  despite  said  attempted  sales,  each  of 
said  sellers  still  remains  the  owner  of  the  shares  of  stock  so 
attempted  to  be  purchased  from  him.    The  decree  finds  that  the 
American  Company  paid  De  Wolf,  as  attorney  in  fact  of  Milo 
G.  Kellogg,  for  the  stock  obtained  from  him,  $351,229.44,  and 
that  the  said  American  Company  paid  to  the  several  owners 
thereof  $114,036.48  for  the  other  shares  of  stock,  being  a  total 
of  $465,265.92  which  the  said  American  Company  paid  for  4,311 
shares  of  stock.     The  decree  finds  that  on  December  19,  1906, 
the  Kellogg  Company  declared  a  dividend  of  50  per  cent,  upon 
all  its  capital  stock  being  then  under  the  control  of  the  Amer- 
ican Company,  and  on  that  date  paid  to  said  American  Company, 
and  said  American  Company  received,  the  dividend  of  50  per 
cent,  upon  the  4,311  shares  of  stock  which  the  said  American 
Company  claimed  to  own.     The  dividend  paid  to  the  American 
Company  on  this  date  was  $215,550.    The  decree  recites  the  pro- 
ceedings of  the  stockholders'  meeting  in  January,  1907,  and  finds 
that  the  set  of  directors  nominated  and  voted  for  by  Milo  G. 
Kellogg  were  duly  elected  directors  of  the  Kellogg  Company,  and 
that  said  Kellogg  was  entitled  to  be  recognized  as  a  stockholder 
of  the  Kellogg  Company,  with  the  right  to  vote  the  shares  of 
stock  attempted  to  be  sold  by  De  Wolf  to  the  American  Com- 
pany, and  that  the  other  set  of  directors,  other  than  Edwards, 
were   not   elected  directors   of  the   said  company.      Following 


112    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

these  findings,  the  decree  of  the  Circuit  Court  ordered,  adjudged, 
and  decreed  that  Milo  G.  Kellogg  and  the  other  stockholders  of 
the  Kellogg  Company  who  had  made  a  pretended  sale  to  the 
American  Company  are  still  severally  the  owners  of  such  shares 
of  stock,  aggregating  4,311  shares,  and  a  permanent  injunction 
is  granted  restraining  the  Kellogg  Company,  and  its  agents  and 
officers,  from  refusing  to  recognize  such  parties  as  stockholders 
and  from  rejecting  the  votes  of  any  of  them  except  in  so  far  as 
the  injunction  might  be  modified,   and  also  from   recognizing 
and  treating  said  American  Company,  or  any  of  its  assigns,  as 
the  owner  or  owners  of  any  of  the  said  4,311  shares  of  stock ; 
that   the   temporary   injunction   heretofore   issued   against   the 
American  Company  and  others  be  made  perpetual.     The  board 
of  directors  declared  to  have  been  elected  by  De  Wolf  at  the 
January  meeting  are  enjoined  perpetually  from  exercising  any 
of  the  powers  or  privileges  of  directors  of  said  Kellogg  Com- 
pany, and  from  in  any  way  interfering  with  the  conduct  or 
management  of  the  business  affairs  or  the  possession  or  control 
of  the  property,  books,  or  papers  of  said  Kellogg  Company, 
unless  hereafter  duly  elected  such  directors  in  said  company. 
De  Wolf  and  Dommerque  were  perpetually  enjoined  from  act- 
ing as  president  and  secretary,  respectively,  of  the  Kellogg  Com- 
pany.    By  the  seventh  paragraph  of  the  decree  it  was  ordered, 
adjudged,  and  decreed  that  the  American  Company,  within  10 
days  from  the  15th  day  of  February,  1908,  deposit  with  the 
clerk  of  the  Circuit  Court,  duly  indorsed  in  blank  or  to  the 
order  of  the  clerk  of  said  court,  all  of  the  certificates  of  stock 
representing  or  purporting  to  represent  4,311  shares  of  stock  so 
attempted  to  be  purchased  by  said  American  Company,  and,  if 
necessary  to  enable  him  to  make  distribution  of  said  shares  ac- 
cording to  the  decree,  said  clerk  is  authorized  to  surrender  such 
certificates,  and  that  the  Kellogg  Company  should  issue  in  lieu 
thereof  other  like  certificates  of  stock,  aggregating  4,311  shares. 
By  the  eighth  paragraph  of  the  decree  it  is  ordered,  adjudged, 
and  decreed  that  within  20  days  after  said  certificates  shall  have 
been  deposited  with  said  clerk,  and  any  of  said  sellers  to  the 
American  Company  of  said  stock  shall  have  been  served  with 
notice  of  the  deposit  of  said  certificates  with  said  clerk,  said 
seller  may  deposit  with  such  clerk  a  certified  check  upon  a  Chi- 
cago bank,  payable  to  the  American  Company,  for  the  difference 


THE  COMMON  LAW  113 

between  the  purchase  price  paid  by  the  American  Company  for 
the  said  stock,  plus  the  interest  at  the  rate  of  5  per  cent,  per 
annum  thereon  from  the  time  or  times  when  payment  or  pay- 
ments were  made  to  the  date  of  said  deposit  of  said  check,  and 
the  sum  of  50  per  cent,  of  the  par  value  of  said  stock,  plus  inter- 
est thereon  at  5  per  cent,  per  annum  from.  December  19,  1906, 
to  the  date  of  the  deposit  of  said  check,  and  upon  delivery  of 
such  certified  check  to  the  clerk  said  clerk  shall  forthwith  de- 
liver to  the  seller  so  depositing  such  check  a  certificate,  duly 
indorsed,  for  the  number  of  shares  so  attempted  to  be  sold  by 
said  seller  to  the  American  Company,  and  shall  deliver  said 
check  to  the  American  Company.  The  decree  names  the  several 
sellers  of  stock  and  the  number  of  shares  that  each  is  entitled 
to  receive  under  this  clause  of  the  decree.  By  paragraph  9 
of  the  decree  it  is  ordered,  adjudged,  and  decreed  that  in  the 
event  the  said  American  Company  shall  not,  in  compliance  with 
this  decree,  deposit  the  said  certificates  for  4,311  shares  of  stock 
within  10  days  from  the  15th  day  of  February,  1908,  the  said 
certificates  of  stock  for  said  4,311  shares  shall,  each  of  them,  be, 
and  the  same  are,  canceled  and  held  for  naught,  and  the  Kellogg 
Company  is  directed  to  immediately  issue  and  deliver  to  the 
clerk  of  the  court  new  certificates  for  said  4,311  shares  of  stock, 
such  certificates  to  be  for  the  several  numbers  of  shares  of  stock 
which  will  permit  the  distribution  to  the  several  parties  as  in 
the  decree  contemplated,  and  the  several  sellers  of  such  stock 
are  permitted  to  receive  the  shares  to  which  they  are  severally 
entitled,  by  depositing  a  check  for  the  amount  and  in  the  man- 
ner provided  in  paragraph  8  of  the  decree,  and  upon  his  doing 
so  the  clerk  shall  deliver  to  such  seller  such  new  certificate  of 
stock  for  the  number  of  shares  specified  opposite  his  name  in 
paragraph  8,  and  said  Kellogg  Company  shall  have  and  recover 
from  the  American  Company  the  sum  of  $215,550,  with  interest 
thereon  at  the  rate  of  5  per  cent,  per  annum  from  December  19, 
1906,  crediting,  however,  in  reduction  of  said  judgment,  all  sums 
received  by  said  American  Company  in  respect  of  dividends  or 
interest  thereon  which  any  seller  shall  have  applied,  by  way  of 
offset,  in  a  settlement  for  his  stock  under  the  provisions  of  the 
decree,  and  in  default  thereof  execution  to  issue  therefor.  Any 
money  collected  by  the  Kellogg  Company  on  said  judgment  is 
to  be  held  by  it  subject  to  the  further  order  of  the  court,  and 

Kales  R.  of  T.  Vol.  1—8 


114    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

any  checks  delivered  to  the  clerk  by  any  seller  under  the  pro- 
visions of  this  paragraph  shall  be  turned  over  and  paid  to  the 
American  Company.  Paragraph  10  of  the  decree  makes  pro- 
vision for  a  public  sale  by  the  master  in  chancery  of  all  or  such 
part  of  the  certificates  of  stock  as  should  not  be  accepted  and 
paid  for  by  the  sellers  thereof  in  accordance  with  the  preceding 
provisions  of  the  decree.  Out  of  the  proceeds  of  the  sale  the 
master  was  directed  to  deduct  his  commission,  and  pay  from 
the  proceeds  of  said  sale  to  the  American  Company  the  differ- 
ence between  the  purchase  price  paid  by  the  said  American  Com- 
pany to  said  seller  to  it,  for  the  shares  of  stock  so  sold  by  the 
master,  plus  interest  at  5  per  cent,  on  said  payments  from  the 
date  when  they  were  made  to  the  day  of  sale,  and  the  sum  of 
50  per  cent,  of  the  par  value  of  the  said  stock  so  sold,  plus 
interest  thereon  at  5  per  cent,  from  December  19,  1906,  to  the 
date  of  said  sale  by  the  master,  and  if  there  is  a  balance  remain- 
ing in  the  hands  of  the  master  of  said  proceeds  he  is  directed  to 
pay  it  to  the  sellers  of  the  stock.  A  provision  is  made  in  the 
decree  modifying  the  injunction  so  as  to  permit  the  board  of 
directors  elected  by  the  votes  of  the  American  Company  in 
Januarj%  1907,  to  continue  in  the  management  of  the  affairs  of 
the  Kellogg  Company  until  all  of  the  sellers  of  said  stock  shall 
have  complied  with  the  provisions  of  the  decree  in  regard  to 
making  a  deposit  with  the  clerk  to  reimburse  the  American 
Company  in  accordance  with  the  provisions  of  paragraphs  8  and 
9  of  the  decree,  or  until  a  sale  of  said  stock.  There  are  some 
general  provisions  in  the  decree  intended  to  regulate  the  conduct 
of  the  affairs  of  the  Kellogg  Company  pending  the  execution 
of  the  decree  which  are  not  necessary  to  be  set  out,  since  they 
are  subsidiary  in  their  nature  and  intended  to  regulate  matters 
of  detail  consistently  with  the  general  relief  granted  by  the 
decree. 

Upon  a  review  of  the  foregoing  decree  by  the  Appellate  Court 
for  the  First  District  the  decree  of  the  Circuit  Court  was  reversed 
and  the  cause  remanded  to  the  Circuit  Court,  with  directions 
to  enter  a  decree  in  accordance  with  the  views  expressed  in  the 
opinion  of  said  Appellate  Court.  The  Appellate  Court  held  that 
the  evidence  sustained  the  material  averments  of  the  bill,  but 
refused  to  hold  that  the  purchase  of  the  stock  by  the  American 
Company  was  void  as  between  the  parties  to  the  sale.     It  held 


THE  COiyOION  LAW  115 

that  the  sale  was  void  as  to  the  minority  stockholders,  and  only- 
voidable  as  to  Kellogg  and  other  sellers.  The  decree  of  the  Cir- 
cuit Court  was  held  to  be  erroneous  in  that  it  recognizes  in  the 
minority  stockholders  the  right  to  have  the  title  to  the  4,311 
shares  of  stock  determined  and  adjudged  upon  their  bill,  holding 
that  such  relief  could  not  be  granted  under  the  pleadings  in  this 
record.  Another  point  of  difference  between  the  Circuit  and 
Appellate  Courts  is  in  regard  to  the  election  of  a  board  of 
directors  at  the  January  meeting,  1907.  The  Appellate  Court 
held  that  owing  to  an. irregularity  in  the  manner  of  voting  the 
shares  of  Milo  G.  Kellogg  the  persons  for  whom  he  attempted  to 
vote  were  not  elected,  independently  of  the  question  as  to  who 
had  the  right  to  vote  said  shares,  and  that  therefore  De  Wolf, 
Hanford  and  Buckingham,  who  had  previously  been  elected 
directors  prior  to  this  meeting,  held  over  until  their  successors 
were  duly  elected;  that,  eliminating  the  4,311  shares  of  stock 
from  the  January  meeting,  there  was  no  quorum  and  no  election, 
hence  the  result  is  reached  that  the  old  board  is  still  holding 
over  in  office  under  the  by-laws,  which  provide  that  the  directors 
shall  hold  their  office  until  their  successors  are  duly  elected. 
The  Appellate  Court  held  that  by  the  alleged  sale  by  De  Wolf 
of  the  Kellogg  stock  a  title  passed  which  is  good  until  set  aside, 
and  that  such  sale  could  only  be  set  aside  on  a  bill  for  that 
purpose  upon  equitable  terms  requiring  a  return  of  the  pur- 
chase money ;  that  the  decree  dismissing  Kellogg 's  cross-bill  was 
an  adjudication  that  he  had  no  right  to  the  stock.  The  relief 
which  the  opinion  of  the  Appellate  Court  directs  to  be  given  is 
limited  to  a  perpetual  injunction  against  the  American  Com- 
pany from  voting  the  stock  and  from  receiving  any  dividends 
thereon,  and  a  like  injunction  against  the  Kellogg  Company 
from  permitting  such  stock  to  be  voted  by  the  American  Com- 
pany or  any  one  representing  it,  and  from  paying  such  Amer- 
ican Company  any  dividends  upon  such  stock. 

While  briefs  have  been  filed  in  this  court  on  behalf  of  four 
parties,  it  is  apparent  that  there  are  only  two  real  adversary 
interests — the  American  Company  and  those  identified  with  it, 
on  the  one  hand,  and  those  who  are  seeking  to  maintain  the  in- 
tegrity and  independence  of  the  Kellogg  Company,  on  the  other. 
All  the  parties  can  readily  be  located  on  the  one  side  or  the 
other  of  this  line  of  division.     The  American  Company,  its 


116    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

president,  Fish,  and  other  officers  and  agents;  the  Electric  Com- 
pany, its  president,  Barton,  and  its  other  officers  and  agents; 
De  Wolf,  and  other  officers  and  agents  of  the  Kellogg  Company, 
who  owe  their  official  relation  to  it  to  the  American  Company 
from  its  control  of  the  majority  of  the  stock  of  the  Kellogg 
Company — are  all  identified  in  interest  with  the  Ajnerican  Com- 
pany; on  the  other  hand,  Milo  G.  Kellogg  and  others  who  made 
the  alleged  sales  of  stock  to  the  American  Company,  the  minority 
stockholders  who  filed  the  original  bill,  and  the  board  of  di- 
rectors for  which  Kellogg  cast  his  votes  at  the  January  meeting, 
in  1907,  represent  the  other  side  of  the  controversy.  "We  will 
consider  the  several  questions  arising  on  this  record  with  this 
general  classification  in  view. 

The  first  question  which  requires  consideration  arises  on  the 
cross-errors  assigned  by  the  American  Company,  which  call  in 
question  the  findings  of  the  Circuit  Court  that  the  tendency  of 
the  stock  purchased  by  the  American  Company  was  to  suppress 
competition  and  that  such  purchase  was  made  for  such  unlawful 
purpose.  This  questio-n  involves  the  right  of  appellants  to  any 
relief  whatever.  If  appellees'  contention  is  sustained  upon  this 
point,  it  would  necessarily  follow  that  the  judgment  of  the 
Appellate  Court  and  the  decree  of  the  Circuit  Court  should 
both  be  reversed  and  the  cause  remanded  to  the  Circuit  Court, 
with  directions  to  that  court  to  dismiss  appellants'  bills. 

A  preliminary  question  is  presented  as  to  the  degree  of  proof 
required  to  establish  the  charges  in  the  bill.  On  behalf  of  the 
American  Company  and  Barton,  it  is  contended  that  the  bill 
charges  them  with  a  criminal  offense,  in  that  the  bill,  in  effect, 
charges  a  violation  of  sections  1  to  4  of  the  anti-trust  law  of 
1891  and  sections  1  to  6  of  the  anti-trust  act  of  1893,  both  of 
which  acts  are  found  in  chapter  38,  sections  269a  to  269t,  Hurd's 
Rev.  St.  1905.  Without  deciding  what  the  rule  as  to  quantity 
of  evidence  would  be  if  a  violation  of  the  anti-trust  laws  were 
charged  in  the  bill,  it  is  sufficient  to  say  that  the  law  of  1893 
has  been  held  unconstitutional  by  the  Supreme  Court  of  the 
United  States  in  Connolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S. 
540,  46  L.  Ed.  679,  and  that  as  to  the  act  of  1891  it  is  leveled 
against  creating,  entering  into,  or  becoming  a  party  to  any  pool, 
trust,  agreement,  or  combination  to  fix  or  limit  the  amount  or 
quantity  of  any  article  of  merchandise  or  fix  the  price  or  lessen 


THE  COMMON  LAW  117 

the  production  and  sale  of  any  such  article,  which  offenses  are 
nat  charged  in  the  bill  either  by  direct  averment  or  necessary 
implication.  The  charge  in  the  bill  is  that  tlie  purpose  and 
tendency  of  the  purchase  of  the  stock  in  question  by  the  Amer- 
ican Company  were  to  stifle  competition,  and  the  purchase  was 
therefore  illegal  and  void  because  contrary  to  the  public  policy 
of  this  state.  Whether  any  of  the  provisionsj)f  the  anti-trust  act^'^  '^^^ 
were  violated  by  any  of  the  parties  to  the  transactions  involved  ::^|,^^  -i 
in  this  suit  is  not  necessary  for  us  to  now  discuss  or  determine.  ^.  ^ 
It  is  a  sufficient  answer  to  this  contention  that  such  violation  is 
not  charged  in  the  pleadings,  nor  is  it  necessary  to  prove  such  I'-M^^ 
offense  to  maintain  the  action  or  defense  set  up  in  these  plead- 
ings. It  is  not  necessary  that  the  proof  should  exclude  every 
reasonable  doubt  of  the  truth  of  the  averments  of  the  bill  to 
justify  a  decree  in  favor  of  appellants.  Does  the  evidence  sus- 
tain the  averments  of  the  bill  upon  the  truth  of  which  the 
unlawful  character  of  the  stock  purchases  depend?  The  evi- 
dence in  this  recard,  which  is  largely  directed  to  a  solution  of 
this  question,  is  very  voluminous.  It  would  not  be  practicable 
within  any  reasonable  limits  of  an  opinion  to  discuss  it  in  detail. 
In  the  biU  o«f  appellants,  as  the  same  was  presented  upon  the 
former  hearing  in  this  court  and  as  the  same  stood,  with  some 
slight  amendments  and  additions,  when  the  cause  was  heard,  the 
facts  relied  upon  to  establish  the  unlawful  purpose  and  tendency 
of  the  stock  purchases  were  set  out  in  detail,  as  will  appear  from 
the  summary  of  those  averments  already  set  out  in  this  opinion. 
The  proof  shows  that  the  American  Company  and  the  Kellogg 
Company  were  competitors  in  business,  and  that  their  fields  of 
operation  extended  not  only  throughout  the  United  States,  but 
to  foreign  countries  as  well.  That  the  American  Company  re- 
garded the  so-caUed  independent  exchanges  throughout  the  coun- 
try as  offering  the  most  serious  obstacle  in  the  way  of  its  complete 
monopoly  of  the  telephone  business  in  the  United  States  cannot, 
under  the  evidence  in  this  record,  be  denied.  The  Kellogg  Com- 
pany manufactured  multiple  switchboards  and  other  telephone 
apparatus  and  supplies,  and  sold  its  products  to  the  independent 
exchanges  throughout  the  country.  The  interest,  therefore,  of 
the  Kellogg  Company  was  identified  with  the  independent  ex- 
changes, since  they  were  the  only  customers  for  its  products. 
It  is  shown  that  Milo  G.  Kellogg  was  an  expert  in  telephony 


118    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

and  a  successful  inventor  of  many  new  and  valuable  appliances 
in  the  telephone  business.  Patents  for  these  appliances  were 
owned  and  controlled  by  the  Kellogg  Company,  and  contributed 
much  to  the  success  both  of  the  Kellogg  Company  and  the  inde- 
pendent exchanges  which  bought  and  used  them.  The  evidence 
shows  that  the  independent  exchanges,  to  the  number  of  7,000, 
maintained  friendly  relations  with  each  other  through  a  central 
organization,  which  holds  annual  conventions  for  the  purpose 
of  discussing  questions  of  mutual  interest  and  with  a  view  of 
advancing  the  interests  of  the  independent  exchanges  in  their 
rivalry  and  competition  with  the  American  Company  and  its 
subsidiary  exchanges.  It  is  also  shown  that  the  American  Com- 
pany controlled  its  licensee  companies  through  the  ownership 
of  a  majority  of  stock  of  the  local  Bell  Telephone  Companies, 
and  that  the  local  Bell  Telephone  Companies  obtained  their 
equipment  entirely  through  the  Electric  Company,  which  the 
American  Company  also  controlled  through  the  ownership  of  a 
majority  of  the  capital  stock  of  the  Electric  Company.  Thus 
the  profits  of  the  American  Company  depended  upon  the  num- 
ber and  success  of  its  subsidiary  companies.  The  Electric  Com- 
pany manufactured  only  for  the  subsidiary  American  companies. 
The  independent  companies  were  compelled  to  procure  their 
apparatus  and  equipment  from  independent  manufacturers,  the 
principal  one  of  which  was  the  Kellogg  Company.  Continuance 
in  business  of  the  independent  exchanges  throughout  the  coun- 
try depended  upon  the  continued  existence  of  the  independent 
manufacturers  of  whom  they  could  procure  equipment.  If  the 
independent  manufacturers  should  go  out  of  business  or  pass 
under  the  control  of  the  American  Company,  the  independent 
exchanges  would  be  reduced  to  the  alternative  of  going  out  of 
business  or  becoming  subsidiary  to  the  American  Company.  In 
addition  to  selling  equipment  to  independent  companies,  the 
Kellogg  Company  and  other  independent  manufacturers  would 
promote  and  finance  the  independent  exchanges  by  furnishing 
money  for  construction  purposes  and  taking  pay  in  securities. 
This  feature  of  the  independent  manufacturers  was  a  source  of 
no  little  concern  to  the  American  Company, 

The  evidence  shows  that  in  November,  1901,  Milo  G.  Kellogg, 
being  much  alarmed  about  his  health,  hastily  placed  the  affairs 
of  the  Kellogg  Company  in  the  hands  of  his  brother-in-law, 


THE  COMMON  LAW  119 

Wallace  De  Wolf,  and  on  or  about  the  23d  day  of  that  month 
went  to  California,  where  he  remained  until  the  latter  part  of 
the  following  summer.  The  Kellogg  Company,  and  Milo  G. 
Kellogg  personally,  had  become  liable,  as  indorsers,  for  a  large 
amount  of  paper  made  by  the  Everett-Moore  syndicate,  and,  in 
anticipation  that  it  would  be  necessary  to  raise  money  to  meet 
these  liabilities  and  other  accruing  bills  of  the  Kellogg  Com- 
pany, Milo  G.  Kellogg  gave  De  Wolf  a  general  power  of  attorney 
to  sell  or  hypothecate  all  the  shares  of  stock  in  the  Kellogg  Com- 
pany which  were  the  individual  property  of  Milo  G.  Kellogg. 
The  evidence  shows  that,  soon  after  the  departure  of  Kellogg 
for  California,  De  Wolf  entered  into  negotiations  with  Barton 
for  the  sale  of  a  controlling  interest  in  the  Kellogg  Company. 
After  one  or  two  interviews  between  Barton  and  De  Wolf,  Bar- 
ton went  to  New  York  and  had  a  conference  with  Fish,  the 
president  of  the  American  Company.  The  result  of  this  inter- 
view was  that  Barton  returned  to  Chicago  with  full  authority 
from  Fish  to  purchase  a  controlling  interest  in  the  Kellogg  Com- 
pany. The  contract  of  sale  was  entered  into  between  Barton 
and  De  Wolf  on  January  4,  1902.  The  money  to  pay  for  this 
stock  was  forwarded  by  Fish  to  Barton  and  by  him  delivered  to 
De  Wolf.  The  stock  was  assigned  to  Barton,  although  he  was 
not  the  real  purchaser,  and,  so  far  as  the  record  shows,  had  no 
personal  interest  in  the  transaction.  It  was  understood  and 
agreed  between  Barton  and  De  Wolf  that  the  transaction  should 
be  kept  secret.  De  Wolf  did  not  inform  Milo  G.  Kellogg  of  the 
sale  until  the  4th  day  of  July,  1902.  De  Wolf  testifies  that 
Kellogg  was  a  very  sick  man,  and  that  he  told  Barton  that  he 
had  gone  to  California,  and  that  he  doubted  whether  he  would 
"ever  recover."  De  Wolf  was  continued  in  charge  of  the  Kel- 
logg Company,  but  after  the  sale  of  this  stock  he  consulted  with 
Barton  with  reference  to  its  affairs.  On  July  4,  1902,  De  Wolf 
met  Milo  G.  Kellogg  in  Denver,  Colo.,  and  then  for  the  first 
time  told  Kellogg  about  the  sale  of  the  stock  to  Barton.  The 
evidence  shows  that  Kellogg  heartily  disapproved  of  the  course 
that  had  been  taken.  He  entered  into  negotiations  for  the  pur- 
pose of  buying  this  stock  back,  but  Fish  and  Barton  refused  to 
sell  him  the  stock,  although  he  offered  a  profit  of  $25  per  share. 
In  the  contract  that  was  entered  into  between  Barton  and  De 
Wolf  it  was  stipulated  that  the  Kellogg  Company  should  be 


120    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

run  for  one  year  as  it  had  been  theretofore.  It  was  also  pro- 
vided in  the  contract  that  Barton  should  purchase  any  other 
shares  of  stock  that  might  be  offered,  upon  the  same  terms  he 
had  contracted  for  the  Kellogg  stock,  and  under  this  clause  the 
purchase  of  the  other  shares  followed. 

The  purpose  and  intent  of  De  Wolf  in  making  this  sale  is  not 
of  controlling  importance.     Whatever  his  purpose   may  have 
been  does  not  assist  us  in  determining  the  buyer's  purpose.    It 
may  be  that  De  Wolf's  purpose  was  to  relieve  the  financial  situa- 
tion of  the  Kellogg  Company,  which  seems  to  have  been  greatly 
exaggerated  in  his  estimation.     At  all  events  he  makes  this  ex- 
cuse for  himself,  and  we  are  disposed  to  take  a  charitable  view 
and  accord  him  the  benefit  of  his  own  explanation.    It  is  certain 
that  neither  Fish  nor  Barton  was  actuated  by  sympathy  for 
any  real  or  imaginary  financial  distresses  that  surrounded  the 
Kellogg  Company.     The  reasonable  inference  from  the  evidence 
in  this  record  is  that,  if  Barton  and  Fish  had  been  sure  that  the 
Kellogg   Company   was   on   the   brink   of  financial   ruin,   they 
would  not  have  invested  in  this  stock,  but  would  have  trusted 
to  the  desired  end  working  itself  out  through  the  downfall  and 
failure  of  the  Kellogg  Company.     We  cannat  conceive  of  the 
American  Company  rushing  in  to  aid  a  rival  in  business  by 
investing  nearly  a  half  million  dollars  in  the  stock  of  a  company 
of  doubtful  solvency.    What,  then,  must  have  been  the  purpose 
of  this  purchase?     In  answer  to  this  question  three  possible 
motives  may  be  suggested:     (1)  The  purpose  may  have  been  to 
acquire  additional   manufacturing  facilities;   or   (2)    to  invest 
idle  funds  of  the  American  Company  in  stocks  which  would 
make  a  fair  return  upon  the  money;  or  it  may  have  been  (3)  to 
advance  the  interests  of  the  American  Company  by  lessening 
the  competition  of  the  independent  exchanges  which  were  being 
supplied  with  apparatus  and  financial  aid  by  the  Kellogg  Com- 
pany.    Let  us  inquire,  in  the  light  of  the  testimony,  which  of 
these  motives  actuated  the  American  Company  in  making  this 
purchase. 

Mr.  Fish,  in  his  testimony  given  in  a  case  against  the  Amer- 
ican Company  in  New  York,  which  was  a  proceeding  to  set 
aside  a  contract  by  which  the  American  Company  obtained  con- 
trol of  the  Stromberg-Carlson  Company,  another  independent 
manufacturing  concern,  testified  as  follows :    ' '  The  question  that 


THE  COMMON  LAW  121 

was  troubling  me  was  not  as  to  the  value  of  the  Stromberg- 
Carlson  Company's  plant  to  any  one  who  wanted  a  telephone 
manufacturing  company.  We  did  not  want  a  telephone  manu- 
facturing company,  because  we  had  one  of  our  own.  We  have 
had  trouble  in  supplying  all  the  wants  of  our  companies  through 
our  present  sources  of  manufacture,  but  it  was  a  trouble  we 
could  meet  by  the  developments  of  our  own  factory."  He  testi- 
fies that  the  Electric  Company  turned  out  last  year  a  product 
of  $69,000,000,  and  these  additional  companies,  being  so  small 
in  comparison  with  the  Electric  Company,  would  not  weigh  in 
the  balance.  The  first  motive  suggested  must  be  eliminated  as 
entirely  without  the  range  of  reasonable  probability. 

Was  this  stock  purchase  made  as  a  legitimate  investment  of 
surplus  funds  by  the  American  Company?  To  this  question  a 
negative  answer  must  be  given  for  the  following  reasons:  (1) 
The  American  Company  is  not  an  investing  company,  except  in 
the  stocks  of  its  subsidiary  companies.  Mr.  Fish  says  in  his 
testimony :  "I  couldn 't  tell  you  what  percentage  of  this  capital 
is  invested  in  the  stocks  of  these  subcompanies.  It  is  a  very 
large  per  cent.  Besides  this,  something  over  $35,000,000,  if  I 
recollect  aright,  is  invested  in  the  long-distance  lines.  Of  course, 
the  company  has  real  estate,  and  also,  of  course,  a  large  invest- 
ment in  the  telephones  that  are  leased  to  these  subcompanies. 
Those  are  the  substantial  items.  I  don't  recall  any  of  large 
magnitude  outside  of  that.  To  no  substantial  extent  that  I 
remember  has  it  been  an  investor  in  other  stocks  than  stocks  of 
companies  connected  with  the  telephone  service.  It  has  to  a 
negligible  extent — to  no  large  extent,  that  I  recall — all  its  invest- 
ments of  stock  have  been  in  these  telephone  companies,  largely 
for  the  purpose  of  developing  those  companies.  In  the  very  old 
days  there  was  undoubtedly  a  period  when  the  company  bought 
stock  for  the  purpose  of  bringing  them  into  the  sphere,  but  it  is 
many  years  since  there  has  been  any  change  in  the  relations, 
and  since  my  time  it  has  been  substantially  all  for  the  purpose 
of  developing  the  business  of  the  companies  whose  stock  was 
already  held,  and  this  stock-buying  has  substantially  been  along 
that  line."  (2)  The  evidence  does  not  show  that  the  American 
Company  had  any  surplus  money  to  invest.  At  the  time  thi^ 
stock  was  purchased  the  American  Company  was  contemplating 
the  issuance   of  $30,000,000  of  its  bonds,   and  within   a  few 


122    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

months  after  this  stock  was  purchased  these  bonds  were  issued 
and  sold,  together  with  issues  of  its  stock  for  the  purpose  of 
raising  funds  to  extend  its  business.  (3)  If  the  American  Com- 
pany bought  this  stock  as  an  investment,  why  refuse  to  sell  it 
to  Kellogg  when,  within  a  few  months  after  the  purchase,  he 
offered  it  a  profit  of  $25  per  share  ?  This  offer  was  refused  when 
this  litigation  was  threatened,  and,  if  the  purchase  had  been 
made  for  the  purpose  of  an  investment,  it  is  reasonable  to  con- 
clude that  the  American  Company  would  have  preferred  a  large 
profit  rather  than  to  imperil  the  whole  investment  in  uncertain 
and  vexatious  litigation. 

Eliminating  from  consideration  the  possible  motives  already 
suggested  and  considered,  we  are  brought  to  the  conclusion  that 
the  only  conceivable  purpose  the  American  Company  had  in 
making  this  purchase  was  to  decrease  to  the  minimum  the  com- 
petition of  the  independent  exchanges,  the  existence  and  success 
of  which  were  due  in  a  large  degree  to  the  Kellogg  Company. 
Is  there  any  evidence  to  justify  this  inference  aside  from  that 
by  which  all  other  rational  motives  are  eliminated? 

Mr.  Fish  says  in  his  testimony:  "The  Kellogg  Company  and 
the  other  manufacturers  for  the  so-called  independent  com- 
panies were  in  the  habit,  and  are  today,  of  financing  them ;  that 
is,  carrying  the  large  indebtedness  and  taking  pay  in  securities. 
.  .  .  I  have  no  doubt  that  in  the  course  of  the  discussion 
[with  his  executive  committee]  I  made  reference  to  that  fact, 
for  I  had  frequently  conadered  it  with  the  executive  committee 
before,  and  probably  did  say  that  with  the  Kellogg  Company 
run  strictly  as  a  business  concern  it  would  no  longer  jeopardize 
its  own  interests  and  hurt  us  by  unduly  financing  the  inde- 
pendent telephone  companies.  ...  If  I  said  anything  at 
all — and  I  don't  remember  that  I  did  say  it,  although  I  have 
often  said  the  same  thing  to  the  members  of  the  executive  com- 
mittee— it  was  that  if  this  arrangement  were  made  the  Kellogg 
Company  would  no  longer  give  extended  credits  to  customers 
like  the  Everett-Moore  syndicate,  that  were  ena/bled  to  develop 
at  the  expense  of  the  manufacturing  companies  from  whom  they 
bought  their  supplies,  and,  to  the  small  extent  that  the  Kellogg 
Company  was  in  the  field  as  a  promoting  company,  that  was  an 
element  to  be  taken  into  account.  .  .  .  The  only  way  in 
which  our  companies  were  injured  by  the  fijiancing  by  the  manu- 


THE  COMMON  LAW  123 

faeturing  companies  of  independent  telephone  companies  was 
not  the  competition  that  those  independent  companies,  when 
financed,  created  in  our  field,  but  the  kind  of  competition,  which 
was  one  based  upon  absolutely  false  ideas  of  cost  and  rates  that 
were  and  have  been  found  to  be  impossible,  .  .  .  and  when 
I  speak  of  the  injury  to  my  companies,  what  I  mean  is,  the  plain 
proposition  that  there  was  an  illegitimate  business  developed  at 
the  expense  of  the  manufacturing  companies."  Again  he  says: 
"I  have  no  doubt  that  we  should  have  used  our  interest  in  the 
Kellogg  Company  exactly  as  we  used  our  interest  in  the  Western 
Electric  Company,  or  any  other  interest — to  benefit  our  organ- 
ization as  a  whole."  Again,  he  testifies  that  it  "was  an  ad- 
vantageous investment  for  us  to  make  of  a  small  amount  of 
money  in  view  of  our  general  interests."  By  "advantageous" 
he  explained :  "I  mean  advantageous  pecuniarily  to  the  Amer- 
ican Telephone  &  Telegraph  Company  and  its  stockholders. 
The  ultimate  motive  is  everywhere  and  always  the  advantage 
of  the  American  Telephone  &  Telegraph  Company  and  its  stock- 
holders." He  testifies  that  in  some  instances  his  company  has 
incidentally  fostered  and  advanced  independent  telephone  com- 
panies, ' '  and  in  some  of  them  we  have  done  it  knowing  what  we 
were  about,"  but  he  distinctly  takes  this  transaction  out  of  that 
class  by  saying:  "I  don't  think  in  this  we  fostered  or  under- 
took to  foster  or  advance  independent  interests."  Again  he 
says:  "We  had  no  purpose  to  save  the  Kellogg  Company  from 
a  collapse  out  of  consideration  for  the  independent  interests." 
Again  Mr.  Fish  says,  in  his  testimony:  "These  transactions  of 
which  you  are  inquiring  were  taken  with  the  end  in  view  of 
working  out  the  telephone  situation  as  well  as  we  could.  If  it 
were  practicable  to  work  it  out  so  as  to  eliminate  the  competition 
in  the  same  territory,  that  would  be  clearly  for  every  one's  in- 
terest, and  it  would  have  undoubtedly  worked  out  in  that  way. 
It  was  our  thought  that  by  making  this  purchase  we  could  get 
rid  of  this  ruinous  competition  in  the  end,  and  be  of  substantial 
benefit  not  only  to  our  company,  but  to  the  competitors  to  our 
company  and  the  public." 

In  view  of  these  admissions  of  the  president  of  the  American 
Company,  the  conclusion  is  irresistible  that  the  purchase  of  the 
stock  of  the  Kellogg  Company  was  made  with  the  purpose  and 
intent  on  the  part  of  the  American  Company  to  ultimately  de- 


124    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

stroy,  as  far  as  possible,  the  competition  of  the  independent 
exchanges  which  were  being  financed  and  furnished  equipment 
by  the  Kellogg  Company.  That  it  was  contemplated  that  ulti- 
mately there  should  be  an  increase  in  the  rates  charged  the 
public  for  telephone  service  as  fa^st  as  the  independent  exchanges 
could  be  put  out  of  business  and  the  American  subsidiary  com- 
panies installed  in  their  stead  is  virtually  admitted  by  Mr.  Fish 
in  his  testimony,  both  in  respect  to  the  Kellogg  purchases  as 
well  as  in  his  evidence  in  regard  to  the  Stromberg- Carlson  deal 
in  New  York.  Mr.  Fish's  contention  is  that  the  independent 
companies  were  furnishing  service  to  the  public  from  30  per 
cent,  to  35  per  cent,  cheaper  than  it  should  be.  He  testifies  that 
in  his  opinion  the  so-called  independent  companies  did  not  figure 
a  sufficient  sum  for  renewal  of  worn-out  equipment,  and  by 
thus  disregarding  this  important  factor  in  the  telephone  busi- 
ness the  independent  exchanges  were  engaged  in  "ruinous" 
competition.  Mr.  Fish  also  testifies  that  "the  American  Com- 
pany is  a  dividend-paying  company.  Its  object  is  to  make 
dividends  as  large  as  possible."  While  he  does  not  say  so,  it  is 
not  impossible  that  the  desire  "to  make  dividends  as  large  as 
possible"  may  also  be  a  factor  which  has  much  to  do  with  the 
price  which  Mr.  Fish  thinks  any  well-regulated  telephone  com- 
pany ought  to  charge  the  public  for  telephone  service. 

The  evidence  is  entirely  satisfactory  in  this  record  that  this 
stock  was  purchased  with  the  intent  and  purpose  charged  in  the 
bill,  and  at  the  time  it  was  contemplated  that  the  Kellogg  Com- 
pany would  cease  business  if  the  original  plan  and  purpose  had 
been  carried  out.  Mr.  Fish  admits  that  he  and  Bartx)n  dis- 
cussed the  probable  loss  that  would  result  from  winding  up  the 
affairs  of  the  Kellogg  Company,  and  that  it  was  estimated  that 
the  loss  would  not  exceed  $100,000.  That  the  original  purpose 
was  to  wind  up  the  affairs  of  the  Kellogg  Company  is  manifest 
from  a  clause  in  the  contract  entered  into  between  De  Wolf  and 
Barton,  by  which  it  was  agreed  that  there  should  be  a  distribu- 
tion of  the  proceeds  of  bills  and  accounts  receivable  to  the  sell- 
ing stockholders.  This  clearly  contemplated  the  liquidation  of 
the  Kellogg  Company.  This  clause  of  the  contract  was  com- 
mented on  by  this  court  on  the  former  hearing,  on  page  23  of 
224  111.  (115  Am.  St.  Rep.  132),  as  follows:  "The  averment 
of  the  bill  to  the  effect  that  it  is  the  purpose  of  the  American 


THE  COMMON  LAW  125 

Company  to  suppress  competition  and  create  in  itself  a  monopoly 
is  further  aided  by  the  averment  that  Barton,  through  whom  the 
purchase  was  made,  agreed  to  pay,  as  part  of  the  purchase  price, 
so  much  per  share  in  cash  and  the  balance  by  applying  thereto 
the  pro  rata  proceeds  of  any  or  all  bills  and  accounts  reasonably 
due  and  owing  to  the  Kellogg  Company  on  December  1,  1901, 
the  same  to  be  settled  and  paid  to  said  seller  as  the  same  are 
paid  and  collected  by  said  company,  plainly  indicating  that  a 
dissolution  of  the  Kellogg  Company  was  contemplated,  because 
in  no  other  event  could  the  American  Company  appropriate  the 
assets  of  the  Kellogg  Company  to  pay  a  stockholder  of  that  com- 
pany for  the  stock  purchased  by  tlie  former  company  from  him ; 
also,  that  by  the  contract  of  purchase  the  Kellogg  Company 
should  be  carried  on  in  the  usual  manner  for  the  space  of  one 
year  in  order  that  bills  and  accounts  receivable  could  be  col- 
lected in  the  usual  course  of  business,  thus  showing  a  purpose 
to  dissolve  the  Kellogg  Company  after  the  expiration  of  one 
year." 

If  further  evidence  were  necessary  to  fix  upon  the  American 
Company  the  unlawful  purpose  of  eliminating  competition  in 
the  purchase  of  this  stock,  the  fact  might  be  pointed  out  that, 
about  the  time  this  purchase  of  stock  in  the  Kellogg  Company 
occurred,  Mr.  Epps  called  on  Mr.  Stromberg  and  said  that  he 
"represented  one  of  the  largest  stockholders  in  the  Kellogg 
Company,"  and  wanted  to  buy  a  controlling  interest  in  the 
Stromberg-Carlson  Company.  Mr.  Stromberg  refused  to  enter- 
tain a  proposition  to  sell.  Epps  was  sent  to  Stromberg  by  De 
Wolf,  who  admits  that  he  had  talked  with  Barton  about  it,  and 
Barton  does  not  deny  his  participation  in  this  transaction.  The 
evidence  shows  that  afterwards  the  Stromberg-Carlson  Com- 
pany's plant  was  removed  to  Rochester,  N.  Y.,  where  it  con- 
tinued to  manufacture  equipment  for  the  independent  telephone 
companies,  and  that  afterwards  the  American  Company  again 
attempted  to  buy  the  Stromberg-Carlson  Company's  plant  by 
purchasing  a  control  of  another  company  which  owned  a  ma- 
jority of  the  stock  of  the  Stromberg-Carlson  Company.  This 
transaction  resulted  in  a  suit  by  the  Attorney  General  of  New 
York,  which  caused  the  abandonment  of  the  proposed  purchase. 
If  a  controlling  interest  in  these  two  large  independent  manu- 
facturing companies  could  have  been  obtained  by  the  American 


126    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Company,   it  would  have   seriously   crippled   independent   ex- 
changes throughout  the  country. 

Again,  the  evidence  shows  that  the  American  Company,  al- 
most immediately  after  the  purchase  of  the  Kellogg  stock,  made 
an  attempt  to  get  control  of  $275,000  of  notes  of  the  Everett- 
Moore  syndicate.  Everett  and  Moore  were  promoters.  They 
had  behind  them  a  syndicate  which  had  built  a  large  number 
of  street  railways  and  telephone  plants  in  Ohio,  Illinois,  and 
elsewhere.  About  the  time  of  the  purchase  of  the  Kellogg  stock, 
the  Everett-Moore  syndicate  became  temporarily  embarrassed 
financially,  and  it  was  at  this  time  and  under  these  circumstances 
that  the  American  Company  sought  to  acquire  the  notes  of  the 
Everett-Moore  syndicate.  Mr.  Fish  in  his  testimony  frankly 
admits  the  attempt  to  obtain  control  of  this  large  amount  of 
indebtedness  against  a  concern  which  was  giving  aid  and  assist- 
ance in  promoting  and  maintaining  independent  telephone  ex- 
changes at  a  time  when  the  Everett-Moore  syndicate  was 
temporarily  embarrassed,  and  the  reason  given  by  Mr.  Fish  for 
desiring  to  obtain  control  of  these  notes  is  thus  explained  by 
Mr.  Fish  himself:  "You  are  undoubtedly  referring  to  the 
thing  I  referred  to  a  short  time  ago,  that  some  time  in  the  spring 
there  was  a  suggestion  made  that  we  should  buy  the  claims 
against  the  Everett-Moore  syndicate ;  and  my  further  impression 
is  that  they  were  claims  of  Mr.  KeUogg's,  and  not  of  the  Kel- 
logg Company,  and  that  we  should  buy  those  for  a  substantial 
discount  from  their  face  value,  which  would  give  us  the  claims 
for  adversary  purposes,  if  we  chose  to  use  them  in  that  way. 
By  adversary  purpose  I  mean  for  the  purpose  of  taking  such 
steps  against  Everett  and  Moore  and  the  Federal  Telephone 
Company  as  were  to  our  interest;  that  we  should  get  such  ad- 
vantage as  there  should  be  by  coming  into  the  possession  of  these 
creditors'  claims."  This  circumstance  is  mentioned  as  throw- 
ing a  sidelight  on  the  general  methods  of  warfare  against  the 
independent  telephone  interests  that  Mr.  Fish  and  his  company 
sanctioned  and  employed.  There  can  scarcely  be  any  doubt 
that  the  purchase  of  the  stock  of  the  Kellogg  Company  pro- 
ceeded from  the  same  general  purpose  which  Mr.  Fish  confesses 
he  had  in  seeking  to  obtain  the  Everett-Moore  syndicate  notes. 
Without  attempting  to  analyze  the  evidence  in  detail  or  fur- 
ther discussing  it  in  general,  our  conclusion  is  that  the  finding 


THE  COMMON  LAW  127 

of  the  Circuit  Court  that  the  purpose  of  the  American  Com- 
pany in  making  this  purchase,  as  well  as  the  inevitable  tendency 
of  the  same,  was  to  lessen  competition  in  the  business  of  fur- 
nishing the  public  with  telephone  service,  is  abundantly  sus- 
tained by  the  proofs.  This  question  of  fact  being  settled,  the 
law  applicable  thereto  was  determined  by  this  court  upon  the 
former  hearing  already  referred  to.  It  would  not  be  necessary 
for  us  to  do  more  than  call  attention  to  our  previous  decision  in 
order  to  establish  the  general  legal  conclusion  to  be  drawn  from 
these  facts,  were  it  not  that  a  serious  difference  of  opinion  seems 
to  exist  as  to  what  this  court  really  did  decide  on  the  former 
hearing.  Appellees  contend  that,  conceding  the  facts  to  be  as 
found  by  the  Circuit  Court,  still  the  stock  purchase  was  only 
voidable,  and  that  such  contention  is  consistent  with  the  pre- 
vious decision  of  this  court  in  this  cause.  This  view  was  adopted 
by  the  Appellate  Court,  hence  the  widely  different  results  reached 
by  that  court  and  the  Circuit  Court  in  the  adjustment  of  the 
equities  of  the  parties.  We  do  not  think  there  is  any  uncer- 
tainty or  ambiguity  in  the  language  employed  by  Mr.  Justice 
Wilkin  in  rendering  the  opinion  of  this  court  on  the  former 
hearing.  224  III.  9,  115  Am.  St.  Rep.  132.  A  careful  reading 
of  that  opinion  will  show  that  the  right  of  the  minority  stock- 
holders to  maintain  their  bill  is  placed  on  two  grounds:  First, 
that  there  was  a  total  want  of  power  in  the  American  Company 
to  purchase  a  controlling  interest  in  a  competing  Illinois  corpora- 
tion. This  question  is  discussed  on  pages  26  to  29  of  the  opinion 
of  224  111.  (115  Am.  St.  Rep.  132),  and  it  is  there  held,  as 
clearly  as  language  can  express  it,  that  no  title  to  the  stock 
passed  by  the  alleged  sale  under  the  facts  averred  in  the  bill,, 
and  that  the  ' '  whole  transaction  is  null  and  void, ' '  and  that  the 
minority  stockholders  had  a  standing  in  equity  to  restrain 
the  pretended  holders  of  such  stock  from  any  participation  in  the 
affairs  of  the  company.  A  second  ground  upon  which  this  court 
held  that  the  bill  might  be  maintained  by  the  minority  stock- 
holders was  that  treating  the  sale  simply  as  an  excessive  and 
wrongful  exercise  of  a  power  which  the  American  Company  had, 
for  the  purpose  of  making  the  Kellogg  Company  subservient  to 
the  American  Company,  thereby  freeing  that  company  and  its 
licensees  from  the  competition  of  the  Kellogg  Company  and  in- 
dependent exchanges,  was  such  a  fraud  against  the  stockholders 


128    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  the  Kellogg  Company  that  the  plainest  principles  of  equity 
gave  them  a  right  to  relief.  This  view  is  presented  on  pages 
29  to  32  of  224  111.,  115  Am.  St.  Rep.  132.  The  discussion  of 
the  second  ground  upon  Avhich  the  bill  was  maintainable  in  no 
way  detracts  from  the  force  of  the  decision  in  regard  to  the  first. 
Both  the  American  Company  and  the  Kellogg  Company  were 
engaged  in  this  state  in  the  same  general  line  of  business.  They 
were  indirectly,  if  not  directly,  competitors  in  the  business  of 
supplying  the  public  with  telephone  service.  This  business  is 
impressed  with  the  public  use.  The  American  Company  could 
exercise  no  powers  in  this  state  which  could  not  be  exercised 
lawfully  by  a  domestic  corporation  in  the  same  line  of  business. 
The  attempt  by  the  American  Company  to  purchase  a  controlling 
interest  in  the  Kellogg  Company  was  unlawful.  The  word  ' '  un- 
lawful," as  applied  to  the  purpose  and  acts  of  corporations,  is 
not  used  exclusively  in  the  sense  of  malum  in  se  or  malum  pro- 
hibitum. It  is  often  employed  to  designate  powers  which  cor- 
porations are  not  authorized  to  exercise  or  contracts  which  they 
are  not  authorized  to  make — or,  in  other  words,  such  acts, 
powers,  and  contracts  as  are  ultra  vires.  Neither  a  foreign  nor 
a  domestic  corporation  can  lawfully  become  a  stockholder  in 
another  corporation  unless  such  power  is  expressly  given  or 
necessarily  implied,  and  especially  is  this  true  where  the  object 
is  to  obtain  the  control  of  such  other  corporation.  There  is  no 
provision  of  our  general  incorporation  law  authorizing  one  cor- 
poration to  purchase  and  hold  shares  of  stock  in  other  corpora- 
tions, and  there  is  no  implied  power  to  so  purchase  stock  in 
other  corporations  except  where  it  is  necessary  to  carry  into 
effect  the  objects  for  which  such  corporation  was  formed.  The 
purchase  of  a  controlling  interest  in  the  Kellogg  Company  by 
the  American  Company  cannot  be  sustained  on  the  ground  of 
implied  power.  As  a  general  proposition,  all  contracts  and 
agreements,  of  every  kind  and  character,  made  and  entered  into 
by  those  engaged  in  an  employment  or  business  impressed  with 
a  public  character,  which  tend  to  prevent  competition  between 
those  engaged  in  like  employment,  are  opposed  to  the  public 
policy  of  this  state  and  are  therefore  unlawful.  All  agreements 
and  contracts  tending  to  create  monopolies  and  prevent  proper 
competition  are  by  the  common  law  illegal  and  void.  People  v. 
Chicago  Gas  Trust  Co.,  130  111.  268,  8  L.  R.  A.  497,  17  Am.  St. 


THE  COMMON  LAW  129 

Rep.  319.  The  public  policy  of  the  state  on  any  question  is  to 
be  sought  for  in  the  Constitution  and  legislation  as  interpreted 
and  expounded  by  the  courts.  Section  22  of  article  4  of  the 
Constitution  of  1870  provides  that  the  General  Assembly  shall 
pass  no  local  or  special  law  for  "granting  to  any  corporation, 
association  or  individual  any  special  or  exclusive  privilege,  im- 
munity or  franchise  whatever."  This  is  a  clear  declaration  that 
the  public  policy  of  this  state  is  opposed  to  all  exclusive  and 
monopolistic  franchises  and  powers,  of  whatsoever  kind  or 
character.  It  is  also  contrary  to  the  public  policy  of  this  state 
to  charter  a  corporation  for  the  purpose  of  buying  and  selling 
real  estate.  The  Connecticut  Land  Company  was  a  corporation 
organized  under  the  laws  of  the  state  of  Connecticut,  and  By 
its  charter  it  was  authorized  to  deal  in  real  estate.  That  cor- 
poration invested  $500,000  in  Illinois  lands.  In  the  case  of 
Carroll  v.  City  of  East  St.  Louis,  67  111.  568,  16  Am.  Eep.  632, 
this  court  held  that  the  Connecticut  Land  Company  had  no 
power  to  purchase  land  in  this  state  contrary  to  the  public  policy 
thereof,  and  that  no  title  passed  to  said  company,  and  it  had  no 
power  to  pass  title  to  its  grantees.  This  case  is  an  illustration 
of  the  application  of  the  doctrine,  announced  by  this  court  on 
the  former  hearing  of  this  case,  that  a  contract  made  in  viola-  '4^ 
tion  of  the  public  policy  of  this  state  is  utterly  void.  It  logically  \ 
follows  that  the  attempt  of  the  American  Company  to  acquire  \ 
the  control  of  the  Kellogg  Company  is  void,  and  that  the  con-  | 
tracts  entered  into  in  pursuance  of  this  purpose  are  mere  nulli-  / 
ties,  and  that  the  title  to  the  stock  in  question  never  passed  from 
the  sellers  to  the  American  Company.  This  was,  in  effect,  what 
this  court  decided  on  the  former  hearing. 

The  next  question  that  requires  consideration  is  whether  the 
Appellate  Court  erred  in  its  direction  to  the  Circuit  Court  in 
respect  to  the  relief  to  be  granted  appellants.  As  already  shown, 
the  Appellate  Court  limits  the  relief  to  be  granted  to  an  injunc- 
tion against  the  American  Company  exercising  the  rights  of  a 
stockholder  and  from  receiving  any  dividends  upon  the  stock  in 
question.  A  decree  confined  to  such  relief  would  leave  this  stock 
in  the  hands  of  the  American  Company,  which  is  inconsistent 
with  the  previous  decision  of  this  court,  wherein  it  is  held  that 
the  American  Company  had  no  corporate  power  to  buy  the 
stock,  and  that  the  attempt  to  purchase  it  was  ultra  vires.    The 

Kales  K.  of  T.  Vol.  1—9 


130    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

interests  of  the  minority  stockholders  could  not  be  as  well  pro- 
tected by  allowing  the  American  Company  to  retain  this  stock 
as  they  will  by  requiring  this  stock  to  be  returned  to  its  rightful 
owners.  It  is  not  conceived  how  it  would  be  practicable  to  con- 
tinue the  business  of  the  Kellogg  Company  with  a  controlling 
interest  in  its  stock  tied  up  by  injunction  in  the  hands  of  an 
unfriendly  competitor.  No  method  of  conducting  the  affairs  of 
the  Kellogg  Company  is  suggested  by  the  opinion  of  the  Appel- 
late Court,  and  it  may  be  that  that  court  took  the  view  that  was 
urged  upon  this  court  in  the  oral  argument,  that  the  decree 
which  the  Appellate  Court  directed  to  be  entered  would,  oper- 
ating from  the  self-interest  of  the  American  Company,  force  it 
to  sell  its  holdings  of  Kellogg  Company  stock.  This  might  or 
might  not  be  the  result,  but  if  the  American  Company  is  allowed 
to  sell  this  stock,  it  will,  of  course,  determine  who  the  purchaser 
or  purchasers  will  be.  A  decree  entered  under  the  direction  of 
the  Appellate  Court  would  leave  the  American  Company  with 
liberty  either  to  retain  the  stock  or  to  sell  it  to  any  person  to 
whom  it  saw  fit  to  sell,  and  the  purchasers  from  the  American 
Company  would  enjoy  all  the  rights,  privileges,  and  benefits  of 
stockholders.  If  the  American  Company  should  sell  this  stock 
to  some  one  who  was  friendly  to  the  American  Company,  it  is 
not  at  all  improbable  that  the  decree  which  the  Appellate  Court 
directs  to  be  entered  would  be  entirely  barren  of  any  substantial 
relief  to  the  minority  stockholders.  It  seems  to  us  that  the  only 
way  any  substantial  and  permanent  relief  can  be  given  to  these 
minority  stockholders  is  to  require  the  American  Company  to 
surrender  its  stock  to  its  rightful  owners  upon  equitable  terms. 
This  relief  the  Circuit  Court  granted,  and  in  our  opinion  prop- 
erly so,  since  nothing  short  of  this  will  afford  the  minority  stock- 
holders complete  relief. 

It  is  contended  by  appellees  that  the  decree  of  the  Circuit 
Court  cannot  be  sustained  because  it  grants  affirmative  relief  to 
Milo  G.  Kellogg  without  a  cross-bill  being  filed  by  him.  When 
this  case  was  before  us  on  the  former  hearing  it  was  held  tliat 
the  court  below  properly  sustained  a  demurrer  to  Kellogg 's 
cross-bill.  One  of  the  reasons  then  given  why  the  decree  was 
affirmed  is  found  on  page  32,  where  this  Court  said:  "We 
think  the  decree  of  the  Circuit  Court  sustaining  the  demurrer 
to  and  dismissing  the  cross-bill  is  right  and  should  be  affirmed. 


THE  COMMON  LAW  131 

No  necessity  whatever  for  that  bill  is  shown.  At  most,  Milo  G. 
Kellogg  was  a  mere  nominal  party  to  the  original  bill.  No  re- 
lief was  prayed  against  him,  and,  if  a  decree  granting  the  prayer 
of  that  bill  had  been  rendered,  he  would  have  obtained  all  he 
was  in  equity  entitled  to."  The  relief  which  Milo  G.  Kellogg 
obtains  under  the  decree  of  the  Circuit  Court  is  a  necessary 
incident  to  the  complete  relief  to  which  the  minority  stockholders 
are  entitled.  As  we  have  already  attempted  to  point  out,  if  a 
controlling  interest  in  the  Kellogg  Company  is  left  in  the  hands 
of  the  American  Company,  or  some  friendly  ally  to  whom  it 
might  choose  to  sell,  it  is  apparent  that  the  interest  of  the 
minority  stockholders  would  be  exposed  to  all  the  dangers  which 
led  them  to  file  their  bill  in  the  first  instance.  It  therefore  be- 
comes necessary,  in  order  to  fully  protect  the  complaining  stock- 
holders, to  divest  the  American  Company  of  all  advantages  it 
has  secured  through  its  unlawful  attempt  to  obtain  control  of 
the  Kellogg  Company.  When  the  court  grants  the  minority 
stockholders  adequate  relief,  it  is  clear  that  the  relief  resulting 
to  Kellogg  and  other  stockholders  who  sold  to  the  American 
Company  is  merely  incidental  to  the  main  relief  sought  by  the 
bill.i^  A  cross-bill  is  wholly  unnecessary.  Kellogg  answered 
the  original  bill,  in  which  he  admitted  all  of  the  material  aver- 
ments thereof,  so  that  there  was  no  issue  as  to  him  to  be  tried, 
and  no  relief  was  prayed  against  him  in  the  original  bill.  In 
Boone  v.  Clark,  129  111.  466,  5  L.  R.  A.  276,  this  court  held  that 
a  cross-bill  filed  by  junior  mortgagees,  filed  in  a  proceeding  to 
foreclose  the  senior  mortgage,  was  properly  dismissed  for  want 
of  equity.  On  page  493  of  129  111.  (5.  L.  R.  A.  276),  this  court 
said:  "It  is  further  insisted  that  at  least  these  appellants  were 
entitled  to  a  decree,  under  their  cross-bill,  foreclosing  their  trust 
deed  as  against  W.  H.  Colehour,  and  the  court,  therefore,  erred 
in  dismissing  the  cross-bill.     The  filing  of  a  cross-bill  is  not 

18 — Observe  that  in  Harriman  v.  shares    of    stock    in    the    Northern 

Northern   Securities   Co.,   197   U.   S.  Pacific  Eailroad  Company  which  he 

244,  295,  Harriman  after  the  decree  had    transferred    to    the    Northern 

of   dissolution   of  the   Northern   Se-  Securities    Company    in    return    for 

curities  Company  at  the  aiit  of  the  stock    of    the    Northern    Securities 

United  States,  affirmed  in  Northern  Company.     This    he    was    not    per- 

Securities  Co.  v.  United  States,  193  mitted  to  do  because  he  was  in  pari 

U,    S.    197,    sought   to    recover    the  delicto. 


132    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

necessary  for  the  preservation  of  the  rights  of  a  junior  mort- 
gagee to  the  same  premises,  as  has  been  seen ;  and,  if  the  appel- 
lants desire,  they  may,  under  their  answer,  move  the  court, 
and  it  wiU  be  the  duty  of  the  chancellor — and  which  may  yet 
be  done  in  this  cause — to  preserve  their  rights,  as  against  Cole- 
hour,  in  any  surplus  remaining  from  the  sale  of  the  property 
after  the  payment  of  the  amount  due  appellees." 

Again,  appellees  contend  that  the  dismissal  of  the  Kellogg 
cross-bill  for  want  of  equity  was  an  adjudication  of  all  his  rights. 
This  contention  is  answered  by  the  quotation  which  we  have 
already  made  from  Boone  v.  Clark,  supra.  The  dismissal  of  a 
cross-bill  for  want  of  equity,  under  circumstances  rendering 
the  cross-bill  unnecessary  in  order  to  obtain  the  relief  sought  by 
it,  is  not  an  adjudication  that  the  complainant  in  the  cross-bill 
has  no  rights  in  the  subject-matter  of  the  litigation.  It  would  be 
a  judicial  outrage  on  the  rights  of  Kellogg  to  dismiss  his  cross- 
bill on  the  ground  that  he  could  obtain  all  the  rights  he  was 
entitled  to  under  the  original  bill,  and  then  deny  him,  upon  the 
hearing  of  the  original  bill,  such  relief  as  he  in  equity  is  clearly 
entitled  to,  on  the  ground  that  his  rights  had  already  been  ad- 
judicated. Courts  of  equity  were  never  designed  to  work  out 
such  unconscionable  absurdities. 

Again,  tlie  appellees  insist  that  the  decree  of  the  Circuit  Court 
cannot  be  sustained  for  the  reason  that  Kellogg  and  the  other 
selling  stockholders  are  in  pari  delicto  with  the  American  Com- 
pany. To  this  we  cannot  assent.  In  the  first  place,  the  unlaw- 
ful features  in  this  transaction  are  largely  imported  into  it  by 
reason  of  the  unlawful  purpose  of  the  American  Company.  It 
was  the  American  Company  that  expected  to  profit  by  suppress- 
ing competition  and  the  creation  of  a  monopoly  in  this  state. 
There  is  no  evidence  that  this  unlawful  purpose  was  entertained 
by  Kellogg  or  the  other  sellers  of  this  stock.  If  it  be  said  that 
De  Wolf  is  particeps  criminis  in  this  transaction,  it  may  be 
replied  that  Kellogg  could  not  and  did  not  attempt  to  authorize 
him  to  enter  into  a  contract  against  the  laws  or  public  policy  of 
the  state.  Kellogg  gave  De  Wolf  a  power  of  attorney  to  sell  his 
stock  if  necessary  to  raise  funds  to  protect  his  interest  and  that 
of  the  Kellogg  Company.  This  was  a  perfectly  legal  and  proper 
thing  to  do.  If  De  Wolf  wrongfully,  and  in  violation  of  the 
confidence  reposed  in  him  by  Kellogg,   entered  into  a  secret 


THE  COMMON  LAW  133 

intrigue  with  the  representatives  of  the  American  Company  for 
the  purpose  of  violating  the  laws  of  public  policy  of  the  state  of 
Illinois,  it  cannot  be  said,  with  any  show  of  reason,  that  Kellogg, 
who  was  then  in  California  and  in  total  ignorance  of  what  his 
agent  was  doing  in  Chicago,  is  equal  in  ^ilt  with  the  American 
Company.  If  wrong  at  all  is  to  be  imputed  to  Kellogg,  it  is 
only  in  a  highly  technical  sense  and  limited  degree.  He  is 
certainly  less  blameworthy  than  the  American  Company.  One 
of  the  exceptions  to  the  rule  that  courts  will  not  interpose  to 
grant  relief  to  either  party  to  an  illegal  agreement  where  both 
parties  stand  in  pari  delicto  is  that  in  some  instances  the  party 
least  blameworthy  may,  in  furtherance  of  justice  and  a  sound 
public  policy,  obtain  full  affirmative  relief.  This  principle  is 
thus  stated  by  Mr.  Pomeroy  in  his  work  on  Equity  Jurisprudence 
(section  942)  as  follows:  "Lastly  when  the  contract  is  illegal, 
so  that  both  parties  are  to  some  extent  involved  in  the  illegality 
— in  some  degree  affected  with  the  unlawful  taint,  but  are  not  in 
pari  delicto;  that  is,  both  have  not,  with  the  same  knowledge, 
willingness,  and  wrongful  intent  engaged  in  the  transaction,  or 
the  undertakings  of  each  are  not  equally  blameworthy — a  court 
of  equity  may,  in  furtherance  of  justice  and  of  a  sound  public 
policy,  aid  the  one  who  is  comparatively  the  more  innocent,  and 
may  grant  him  full  affirmative  relief  by  canceling  an  executory 
contract,  by  setting  aside  an  executed  contract,  conveyance,  or 
transfer,  by  recovering  back  money  paid  or  property  delivered, 
as  the  circumstances  of  the  case  shall  require,  and  sometimes 
even  by  sustaining  a  suit  brought  to  enforce  the  contract  itself, 
or,  if  this  be  impossible,  by  permitting  him  to  recover  the  amount 
justly  due  by  means  of  an  appropriate  action  not  directly  based 
upon  the  contract.  Such  an  inequality  of  condition  exists,  so 
that  relief  may  be  given  to  the  more  innocent  party,  in  two 
distinct  classes  of  cases:  (1)  It  exists  where  the  contract  is 
intrinsically  illegal,  and  is  of  such  a  nature  that  the  undertak- 
ings or  stipulations  of  each,  if  considered  by  themselves  alone, 
would  show  the  parties  equally  in  fault,  but  there  are  collateral 
and  incidental  circumstances  attending  the  transaction  and  af- 
fecting the  relations  of  the  two  parties  which  render  one  of 
them  comparatively  free  from  fault.  Such  circumstances  are 
imposition,  oppression,  duress,  threats,  undue  influence,  taking 
advantage  of  necessities  or  of  weaknesses,  and  the  like,  as  a 


134    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

means  of  inducing  the  party  to  enter  into  the  agreement,  or  of 
procuring  him  to  execute  and  perform  it  after  it  had  been  vol- 
untarily entered  into.  (2)  The  condition  also  exists  where,  in 
the  absence  af  any  incidental  and  collateral  circumstances,  the 
contract  is  illegal  but  is  intrinsically  unequal;  is  of  such  a 
nature  that  one  party  is  necessarily  innocent  as  compared  with 
the  other;  the  stipulations,  undertakings,  and  position  of  one 
are  essentially  less  illegal  and  blameworthy  than  those  of  the 
others." 

But  there  is  something  else  here.  It  must  be  borne  in  mind 
all  the  while  that  in  this  proceeding  a  court  of  equity  is  seeking 
to  protect  the  public  against  an  infringement  of  the  public  policy 
of  the  state,  and,  having  determined  that  the  transactions  in 
question  in  their  purpose  and  inevitable  tendency  are  to  stifle 
competition  and  create  a  monopoly  of  a  business  impressed  with 
a  public  character,  the  court  will  not  be  deterred  from  admin- 
istering full  relief  by  forms  of  procedure  or  technical  rules 
which  might  control  its  action  under  other  circumstances.  Re- 
gard for  the  public  welfare  is  the  highest  law  of  the  land. 
Broom's  Legal  Maxims,  p.  1.  Pomeroy,  in  his  work  on  Equity 
Jurisprudence  (section  941),  thus  states  the  principle  now 
under  discussion:  "Even  where  the  contracting  parties  are  in 
pari  delicto,  the  courts  may  interfere  from  motives  of  public 
policy.  Whenever  public  policy  is  considered  as  advanced  by 
allowing  either  party  to  sue  for  relief  against  the  transaction, 
then  relief  is  given  to  him.  In  pursuance  of  this  principle  and 
in  compliance  with  the  demands  of  a  high  public  policy,  equity 
may  aid  a  party  equally  guilty  with  his  opponent,  not  only  by 
canceling  and  ordering  the  surrender  of  an  executory  agree- 
ment, but  even  by  setting  aside  an  executed  contract,  convey- 
ance, or  transfer,  and  decreeing  the  recovery  back  of  money 
paid  or  property  delivered  in  performance  of  the  agreement." 
The  cases  cited  by  the  author  in  the  footnotes  fully  sustain  the 
text.  Story's  Equity  Jurisprudence  (13th  Ed.)  vol.  1,  §298, 
recognizes  the  same  principle.  This  author  says :  ' '  But  in  cases 
where  the  agreement,  or  other  transactions  are  repudiated  on 
account  of  their  being  against  public  policy,  the  circumstance 
that  the  relief  is  asked  by  a  party  who  is  particeps  criminis  is 
not,  in  equity,  material.  The  reason  is  that  the  public  interest 
requires  that  relief  shall  be  given,  and  it  is  given  to  the  public 


THE  COMMON  LAW 


135 


through,  the  party."  ^^  The  rule  that  courts  will  not  interpose 
to  grant  relief  when  an  illegal  agreement  has  been  made  and 
both  parties  stand  in  pari  delicto  ^'^  cannot  be  invoked  by  ap- 
pellees as  a  defense  in  this  case. 


19 — Johnson  v.  Cooper,  2  Yerg. 
(10  Tenn.)  524  (laud  lost  at  gaming 
and  conveyed  to  winner,  recovered  by 
the  loser  in  equity) ;  Whittingham  v. 
Burgoyne,  3  Anst.  Eep.  900  (pur- 
chaser of  commission  in  the  army 
recovered  the  amount  paid)  ;  Elicker 
V.  Wynne,  2  Head  (Tenn.),  617 
(loser  in  gaming  transaction  re- 
covered property  transferred  to 
winner) ;  Jackman  v.  Mitchell,  13 
Ves.  Jr.  581,  587  (bond  to  secure  to 
one  creditor  the  deficiency  of  a  com- 
position not  communicated  to  the 
other  creditors  decreed  to  be  de- 
livered up  with  costs  though  the  one 
who  gave  the  bond  was  particeps 
criminis  to  the  illegal  transaction. 
The  court  said:  "In  these  cases, 
which  proceed  upon  grounds  of  pub- 
lie  policy,  the  relief  is  given  on 
account,  not  of  the  individual,  but  of 
the  public")  ;  Lord  St.  John  v.  Lady 
St.  John,  11  Ves.  Jr.  525,  535  (equity 
might  require  the  delivery  up  of  a 
deed  even  to  a  particeps  criminis 
where  it  was  made  pursuant  to  an 
illegal  separation  agreement  by  hus- 
band and  wife.  The  court  said: 
"The  authorities  go  to  this:  that 
where  the  transaction  is  against 
policy,  it  is  no  objection,  that  the 
plaintiff  himself  was  a  party  to  that 
transaction,  which  is  illegal")  ;  Pull- 
man Palace  Car  Co.  v.  Transporta- 
tion Co.,  171  U.  S.  138  (the  Pullman 
Company  made  a  lease  of  all  its 
assets  to  another  company,  which 
was  illegal  and  void  as  against  pub- 
lic policy  because  it  involved  an 
abandonment  by  the  Pullman  Com- 
pany of  its  duty  to  the  public.    The 


Pullman  Company  in  suing  for  rent 
on  the  lease  discovered  this  fact,  for 
the  recovery  was  denied  in  139  U.  S. 
24.  The  Pullman  Company  then  took 
the  affirmative  and  sued  to  set  aside 
the  lease  and  recover  the  property 
conveyed.  This  it  was  permitted  to 
do) ;  Meech  v.  Lee,  82  Mich.  274 
(mother  who  had  mortgaged  to  save 
her  son  from  criminal  prosecution 
was  permitted  to  set  aside  the  mort- 
gage in  equity  and  recover  the  land)  ; 
Gorringe  v.  Reed,  23  Utah  120  (deed 
given  by  wife  to  prevent  prosecution 
of  husband  set  aside  at  the  suit  of 
the  wife)  ;  Daniels  v.  Benedict,  50 
Fed.  347  (wife  agreeing  that  suit 
for  divorce  might  be  begun  against 
her  on  the  sole  ground  of  desertion 
allowed  to  set  aside  a  decree  obtained 
against  her  on  the  ground  of  adul- 
tery) ;  Cox  v.  Donnelly,  34  Ark.  762 
(the  court  said,  p.  766:  "Although 
in  general,  courts  of  equity  will  not 
interpose  to  grant  relief  to  persons 
who  are  parties  to  agreements  or 
other  transactions  against  public 
policy,  there  are  cases  where  the 
public  interest  requires  that  they 
should,  for  the  promotion  of  public 
policy,  interpose,  and  the  relief  in 
such  cases  is  given  the  party"). 

20— Goodrich  v.  Tenney,  144  111. 
422  (a  contract  between  a  person  and 
an  attorney  representing  creditors, 
that  such  person  would  procure  affi- 
davits of  the  debtor  and  two  others 
showing  that  a  sale  made  by  the 
debtor  was  fraudulent  and  also 
depositions  to  the  same  effect,  for 
which  such  person  is  to  be  paid 
25%  of  the  debt  collected  is  illegal 


136    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

We  have  discussed  the  questions,  both  of  law  and  fact,  upon 
which  the  right  of  the  appellants  to  relief  depends.  There  are 
some  other  questions  of  minor  importance  treated  in  the  briefs 
of  counsel  for  appellees — such  as  that  appellants  are  not  prose- 
cuting the  suit  in  good  faith  for  their  own  benefit,  and  that  there 
is  a  coUusion  between  Kellogg  and  appellants — which  we  have 
considered,  but  we  do  not  deem  these  matters  of  sufficient  im- 
portance to  require  discussion.  From  what  has  been  said,  it 
follows  that  the  decree  of  the  Circuit  Court  is  based  upon  a 
correct  solution  of  the  questions  involved.  That  part  of  the 
decree  which  adjusts  the  equities  of  the  parties  is  attacked  by- 
appellees  on  the  ground  that  it  proceeds  from  an  erroneous  de- 
cision of  the  questions  involved.    If  the  sale  of  stocks  in  question 


and  void  and  the  person  cannot 
recover  from  the  attorney.  The  law 
leaves  the  wrongdoer  where  it  finda 
him.  It  made  no  difference  that 
the  attorney  had  received  the  money. 
He  was  not  obliged  to  account  for  it 
and  no  implied  assumpsit  arose  in 
plaintiff's  favor);  Perry  v.  U.  S. 
School  Furniture  Co.,  232  111.  101 
(equity  would  not  enforce  a  judg- 
ment obtained  upon  a  contract  which 
was  in  violation  of  the  anti-trust 
law)  ;  Conway  v.  Garden  City  Paving 
Co.,  190  111.  89  (contract  between 
bidders  for  a  public  contract  tending 
to  stifle  competition  between  them 
is  illegal  and  the  plaintiff  is  not 
entitled  to  recover  the  consideration 
promised,  although  he  had  rendered 
the  service  required)  ;  Crichfield  v. 
Bermudez,  174  111.  466  (contract  to 
promote  passage  of  special  assess- 
ment ordinance  illegal  and  plaintiff 
could  not  recover  on  it)  ;  Craft  v. 
McConoughy,  79  111.  346  (contract 
in  restraint  of  trade  which  took  the 
form  of  a  partnership  for  the  pur- 
pose of  dealing  in  grain.  No 
accounting  for  profits  allowed  by  one 
partner  against  the  other).  See  also 
Schubart   v.    Chicago    Gas   Light   & 


Coke  Co.,  41  III.  App.  181,  186; 
Griffin  &  Connelly  v.  Piper,  55  111. 
App.  213;  American  Strawboard  Co. 
v.  Peoria  Strawboard  Co.,  65  111. 
App.  502;  Evans  v.  American  Straw- 
board  Co.,  114  111.  App.  450;  Mc- 
MuUen  v.  Hoffman,  174  U.  S.  639 
(contract  to  suppress  bidding  and 
competition)  ;  St.  Louis  E.  R.  v. 
Terre  Haute  E.  R.,  145  U.  S.  393 
(lease  by  one  railroad  to  another 
which  is  ultra  vires  of  one  or  both, 
not  set  aside  in  equity  at  the  suit 
of  the  lessor.  The  in  pari  delicto 
doctrine  applied,  see  especially  p. 
407)  ;  Harriman  v.  Northern  Securi- 
ties Co.,  197  U.  S.  244,  295,  298.  (In 
the  government  suit  against  the 
Northern  Securities  the  United 
States  enjoined  the  voting  of  the 
railroad  stock  held  by  the  Northern 
Securities  Company.  The  decree, 
however,  did  not  cancel  the  Northern 
Securities  stock  held  by  the  stock- 
holders of  the  Northern  Securities 
Company  which  had  been  issued  in 
return  for  the  stock  of  the  two  rail- 
roads transferred  to  the  Northern 
Securities  Company.  The  court 
doubted  its  power  to  do  this  in  view 
of    the    fact    that    the    stockholders 


THE  COMMON  LAW 


137 


were  void  and  no  title  passed,  as  the  Circuit  Court  found  and 
as  we  have  sought  to  show,  we  perceive  no  objection  to  the 
extent  of  the  relief  granted  or  the  methods  adopted  by  the 
Circuit  Court  to  adjust  the  equities  between  the  parties.  No 
other  or  better  method  of  settling  this  controversy  occurs  to  us, 
and  none  is  suggested  or  pointed  out  by  appellees.  The  15th 
of  February,  1908,  the  date  fixed  by  the  decree  of  the  Circuit 
Court  from  which  the  time  when  the  various  acts  in  the  execu- 
tion of  the  decree  were  reckoned,  having  passed,  it  is  ordered 
that  all  acts  which  in  the  terms  of  said  decree  were  to  be  per- 
formed within  a  given  number  of  days  from  the  15th  day  of 
February,  1908,  shall  be  performed  in  like  manner  as  in  said 
decree  directed  within  a  like  number  of  days  from  the  15th 
day  of  April,  1909,  and  that  said  decree  of  the  Circuit  Court 
shall  be  executed  in  all  respects  as  therein  directed,  except  the 


were  not  made  parties.  In  the 
Harriman  suit  those  who  had  given 
up  railroad  stock  for  the  stock  of 
the  Northern  Securities  Company 
came  into  court  to  get  their  stock 
back.  It  was  held  that  they  were 
not  entitled  to  do  so.  (1)  Harriman 
was  particeps  criminis  and  the  usual 
rule  that  he  would  be  left  where  he 
was  applied.  (2)  The  exception  that 
on  grounds  of  public  policy  and  to 
vindicate  the  public  right  the  wrong- 
doer might  recover  what  he  had 
transferred,  was  inapplicable  be- 
cause the  public  right  had  been 
completely  vindicated  by  the  Attor- 
ney-General in  the  government  suit. 
Hence  Harriman  was  left  without 
any  excuse  for  attempting  to  get 
back  the  stock  transferred) ;  Central 
Transportation  Co.  v.  Pulbnan's  Car 
Co.,  139  U.  S.  24  (the  Central  Com- 
pany was  not  permitted  to  sue  for 
rent  on  a  lease  it  had  made  of  all  its 
assets) ;  Woodstock  Iron  Co.  v. 
Extension  Co.,  129  U.  S.  643  (agree- 


ment to  build  a  railroad  on  a  longer 
line  in  order  that  it  should  pass  by 
plaintiff 's  factory.  Railroad  carried 
out  its  part  of  the  bargain  but  could 
not  recover  the  consideration).  See 
also  Hitchcock  v.  Davis,  87  Mich. 
629,  632 ;  Belding  v.  Pitkin,  2  Caines 
(N.  Y.)  147;  Atcheson  v.  Mallon, 
43  N.  Y.  147;  Leonard  v.  Poole,  114 
N.  Y.  371;  Wheeler  v.  Eussell,  17 
Mass.  258,  281 ;  Snell  v.  Dwight,  120 
Mass.  9 ;  Kahn,  Jr.  v.  Walton,  46  Oh. 
St.  195;  Thomas  v.  BrownvUle  Bail- 
way,  2  Fed.  877  (here  a  contract 
between  a  railroad  and  a  construc- 
tion company  was  held  void  because 
the  directors  of  the  railroad  were 
interested  in  the  construction  com- 
pany. This  contract  was  so  far 
against  public  policy  that  no  equi- 
table relief  by  way  of  foreclosure 
was  permitted  on  the  bonds  held 
by  it.  Furthermore,  the  stock- 
holders were  not  estopped  by  long 
acquiescence   in   such   a  contract). 


138    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

15th  day  of  April,  1909,  shall  be  substituted  for  the  15th  day 
of  February,  1908. 

Believing  that  the  decree  of  the  Circuit  Court  does  justice 
between  the  parties,  enforces  the  law  and  upholds  a  sound 
public  policy,  and  that  there  is  no  reversible  error  therein,  the 
decree  should  be  affirmed.  The  judgment  of  the  Appellate 
Court  for  the  First  District  is  therefore  reversed,  and  the  de- 
cree of  the  Circuit  Court  affirmed. 

Appellate  Court  reversed,  Circuit  Court  affirmed.^i 


CHAPIN  v.  BROWN  BROS. 
(Supreme  Court  of  Iowa,  1891.     83  la.  156.) 

ROTHROCK,  J.  It  appears  from  the  petition  that  in  the 
month  of  March,  1890,  the  plaintiffs  entered  into  a  written 
agreement  with  the  defendants  and  other  parties.  The  follow- 
ing is  a  copy  of  said  agreement : 

"We,  the  undersigned  grocerymen  of  Storm  Lake,  finding 
the  business  of  purchasing  butter  of  farmers  and  handling  the 

21 — People  V.  Nussbaum,  66  N.  Y.  an    illegal    purpose    or    intent,    be- 

Supp.  129  (1900) ;  Chester,  J.,  said:  comes,  by  virtue  of  such  purpose  or 

"It   is   also    asserted   that  under  intent,   illegal,   and  therefore   to  be 

the  laws  of  this  state,  as  well  as  those  condemned.     WhUe  the  law  permits 

of  Maine  and  of  New  Jersey,  it  was  one    corporation    to    buy    and    hold 

lawful  for  the  American  Ice  Com-  stock    of    another    corporation,    the 

pany   to  exchange   its   capital   stock  attorney-general    sufficiently    alleges 

for  the  capital  stock  of  the  Consoli-  that    this    was    done    in    this    case 

dated  and  Knickerbocker  Ice  Com-  for   an   unlawful    purpose.     He   al- 

panies.    It  is  true  that,  under  section  leges,  in  effect,  that  the  purpose  of 

40    of    the    stock    corporation    law  the    alleged   agreement   or   arrange- 

(Laws  1892,  c.  688),  this  is  so;  and  ment  between  these  companies  to  so 

it   has   been   held   that   that   section  combine  their  interests  was  to  create 

authorizes    one   corporation   to   pur-  a  monopoly  in  the  ice  business,  and 

chase  stock  in  another,  although  the  destroy   competition   in   the   produc- 

result  might  be  to  destroy  competi-  tion,  supply,  and  sale  of  ice  in  the 

tion.     Eafferty  v.  Gas  Co.,  37  App.  city  of   New  York,  in  violation  of 

Div.  618.     But  it  may  happen  that  law,  and  that  in  pursuance  of  such 

an  act  otherwise  legal,  if  done  with  agreement     and     arrangement     the 


jSJ^  ^  V  /  ~ 

^    \P^  ^-  ^jr  ^y-^THE  COMIMON  LAW,/, 


same  very  burdensome,  and  of  material  loss  to  us,  and  believing 

the  same  could  be  handled  as  advantageously  by  persons  who   \^;f 

would  make  butter  buying  and  handling  an  exclusive  business, 

and  whereas,  the  firm  of  D.  &  E.  Chapin,  through  their  agent,  \^,  j 

assure  us  of  their  ability  to  handle  butter  to  the  best  advantage, 

and  that  they  will  engage  in  the  business  extensively  in  our 

town,  we  make  a  solemn  engagement  and  pledge  ourselves  to 

each  other  and  to  the  said  firm  of  D.  &  E.  Chapin  that  we  will 

buy  no  more  butter  or  take  no  more  in  trade,  except  for  our 

family  use,  and  all  butter  so  bought  shall  be  delivered  by  the 

seller  to  the  buyer's  place  of  residence.     This,  however,  shall  -*-^<**-*-' 

not  prevent  any  merchant  from  buying  butter  to  retail  from  yL>.u.-^» 

any  regular  butter  buyer  who  buys  all  the  butter  he  handles  in 

this  town  for  cash.    It  is  further  provided  that  the  said  firm  of 

D.  &  E.  Chapin,  in  whose  favor  we  abandon  the  business,  shall 

open  rooms  conveniently  located  for  buying  butter;  that  they 

shall  keep  a  man  in  attendance  during  all  business  days  and 

hours  in  the  year  from  as  early  in  the  morning  and  until  as  late 

in  the  evening  as  the  season  of  the  year  and  state  of  the  weather 

might  seem  to  require.    They  shall  accept  all  the  butter  offered, 

and  shall  pay  for  the  same  as  high  price  in  cash,  or  by  giving 

check  against  a  suitable  deposit  in  some  bank  in  this  town,  as 

merchants  or  butter  buyers  in  the  town  of  Newell,  this  county, 

are  at  the  time  paying  in  cash  for  a  similar  grade  of  butter, 

except  in  extreme  cases,  where  they  may  be  paying  materially 

more  than  the  markets  will  warrant.     It  is  also  provided  that 

the  said  D.  &  E.  Chapin  shall  not  direct  their  checks  or  persons 

taking  the  same  to  any  particular  store  for  payment.    That  they 

shall  not  buy  in  connection  with  any  dry  goods  or  grocery  store. 

Whenever  a  majority  of  the  merchants  signing  this  article  of 

agreement  are  convinced  that  the  engagements  herein  entered 

into  are  not  being  complied  with,  or  whenever  they  are  dis- 

American  Ice  Company  acquired  the  state  of  a  monopoly  of  the  produc- 

stock   of   the    other   two   companies.  tion  or  sale  of  an  article  of  common 

I    think,    therefore,    that   he   brings  rise,  or  the  restraining  or  preventing 

the  case  within  the  provisions  of  the  competition   in   the  price   or  supply 

law  which  condemns  every  contract,  of  any  such   article,  and   that   his 

agreement,     arrangement,     or     com-  written    application    is   sufficient   to 

bination  having  for  its  purpose  the  justify    the    order    for    examination 

creation  or  maintenance  within  this  which  has  been  granted." 


140    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

satisfied  with  this  arrangement  or  the  manner  in  which  it  is 
being  carried  out,  any  merchant  whose  name  is  hereto  appended 
may  appoint  a  meeting  by  notifying  each  grocery  firm  in  town 
of  the  time  and  place  for  the  purpose  of  considering  who  may 
be  guilty  of  a  breach  of  faith  in  carrying  out  these  engage- 
ments, or  whether  it  is  advisable  to  continue  the  same;  and  if, 
at  such  meeting,  a  majority  of  the  subscribers  hereto  shall  cer- 
tify in  writing  that  they  think  it  advisable  for  the  interest  of 
the  town  to  withdraw  from  this  engagement,  this  contract  shall 
become  null  and  void.  This  engagement  shall  take  effect  and 
be  in  force  from  and  after  such  time  as  when  it  shall  have  been 
subscribed  to  by  each  grocery  house  in  this  town,  and  when 
the  firm  of  D.  &  E.  Chapin  shall  designate,  provided  they  are 
then  prepared  to  handle  the  butter,  and  shall  continue  two  (2) 
years  unless  sooner  dissolved,  as  herein  provided.  We  also 
agree  not  to  pay  a  higher  price  for  eggs  than  shall  be  fixed  by 
the  said  firm  of  D.  &  E.  Chapin,  provided  said  firm  shall  fix 
as  high  price  as  eggs  are  at  the  time  worth  to  ship.  "W.  C. 
KiNNE  &  Co.,  Fred  Scholler,  Brown  Bros.,  J.  0.  Douglas, 
W.  A.  Jones,  Geo.  E.  Ford  &  Bro.,  W.  Lownsberry,  Libby  & 
Rae,  D.  &  E.  Chapin." 

It  is  averred  in  the  petition  that  the  plaintiffs,  in  pursu- 
ance of  said  written  contract,  came  and  located  at  Storm 
Lake,  and  engaged  in  the  business  of  buying  butter  at  that  place, 
and  were  at  the  commencement  of  the  suit  still  so  engaged,  and 
have  made  arrangements  to  continue  the  business  for  the  said 
period  of  two  years,  and  that  they  have  thus  far  fully  complied 
with  said  written  agreement,  but  that  the  defendants,  in  viola- 
tion thereof,  have  opened  a  butter  store  in  said  town,  and 
have  engaged  in  the  business  of  buying  butter  generally,  and  have 
thereby  interfered  with  plaintifi's'  business,  and  alienated  their 
trade  to  the  extent  of  5,000  pounds  of  butter,  upon  which  plain- 
tiffs would  have  realized  a  profit  of  3  cents  a  pound,  making 
in  all  $150  damages  suffered  by  plaintiffs.  Judgment  is  de- 
manded for  said  sum,  and  an  injunction  is  prayed  restraining 
the  defendants  from  continuing  in  said  business. 

Among  the  several  grounds  of  objection  to  the  granting  of 
an  injunction  we  regard  two  of  them  as  material.  They  are 
as  follows:  ''First,  that  the  agreement  in  writing  is  void  for 
want  of  consideration,  as  there  is  no  money  value  inuring  to 


THE  COMMON  LAW  141 

the  benefit  of  the  defendants  herein;  and,  second,  that  said  con- 
tract by  its  terms  is  for  the  purpose  of  creating  a  monopoly  in 
purchasing  and  selling  butter  at  Storm  Lake,  and  is  therefore 
in  restraint  of  trade,  to  the  detriment  of  the  producers  and 
consumers  of  butter  at  that  place  and  in  that  vicinity."  The 
history  of  the  law  upon  the  question  of  contracts  in  restraint 
of  trade  is  an  interesting  subject  of  investigation.  The  books 
abound  in  cases  upon  the  subject.  Anciently  all  contracts  were 
void  which  in  any  degree  tended  to  the  restraint  of  trade,  even 
in  a  particular  locality,  and  for  a  limited  time.  This  ancient 
rule  has  been  so  far  modified  that,  although  agreements  in 
general  restraint  of  trade  are  invalid,  because  they  deprive  the 
public  of  the  services  of  the  citizen  in  the  occupation  or  calling 
in  which  he  is  most  useful  to  the  community,  and  expose  the 
people  to  the  evils  of  monopoly,  and  prevent  competition  in 
trade,  yet  an  agreement  in  partial  restraint  of  trade  will  be 
upheld  where  the  restriction  does  not  go  beyond  some  particular 
locality,  is  founded  upon  a  sufficient  consideration,  and  is 
limited  as  to  time,  place,  and  person.  It  is  accordingly  every- 
where now  held  that  when  one  engaged  in  any  business  or 
occupation  sells  out  his  stock  in  trade  and  good-will  he  may 
make  a  valid  contract  with  the  purchaser  binding  himself  not 
to  engage  in  the  same  business  in  the  same  place  for  a  time 
named,  and  he  may  be  enjoined  and  restrained  from  violating 
his  contract.  This  is  about  as  far  as  contracts  in  restraint  of 
trade  have  been  upheld  by  the  courts  in  this  country  or  in 
England.  The  general  principles  above  announced  will  be  found 
in  all  text-books  upon  contracts,  and  find  support  in  many 
adjudged  cases.  We  have  not  thought  it  necessary  to  set  out  or 
cite  the  cases.  They  will  be  found  collected  in  3  Amer.  &  Eng. 
Enc.  Law,  p.  882,  and  10  Amer.  &  Eng.  Enc.  Law,  p.  943 ;  2  Pars. 
Cont.  p.  747. 

Applying  these  rules  to  the  contract  under  consideration,  we 
are  to  inquire  first  whether  there  is  a  sufficient  consideration 
for  the  promise  of  the  defendants  and  the  other  parties  who 
executed  the  instrument  not  to  engage  in  dealing  in  butter  at 
Storm  Lake.  It  is  very  plain  that  there  was  no  money  paid  to 
them  as  a  consideration.  The  plaintiffs  did  not  purchase  any 
stock  of  butter  which  the  defendants  had  on  hand.  They  paid 
nothing  for  an  established  plant  or  place  of  doing  business,  nor 


142    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

for  the  good-will  of  any  business.  So  far  as  appears,  they  went 
into  the  town  of  Storm  Lake,  and  proposed  to  go  into  the  butter 
business  if  the  other  persons  then  engaged  in  that  business 
would  agree  to  quit  that  line  of  trade  for  two  years.  In  all 
the  search  we  have  made  for  authority  upon  this  branch  of  the 
controversy  we  have  found  no  warrant  in  any  precedent  for 
holding  that  this  is  a  sufficient  consideration.  There  are  cases 
which  hold,  and  the  law  is  well  settled,  that  where  a  party 
proposes  to  expend  money  in  erecting  a  manufactory  or  other 
plant  which  may  be  a  public  benefit,  subscriptions  in  aid  of  the 
enterprise  are  valid  obligations.  But  such  contracts  are  widely 
different  in  principle  from  the  agreement  under  consideration. 
Suppose  the  plaintiffs  had  made  a  proposition  to  the  dry  goods 
merchants  of  Storm  Lake  that  if  they  would  all  quit  the  busi- 
ness for  two  years,  without  any  consideration  being  paid  to 
them  for  so  doing,  the  plaintiffs  would  establish  a  dry  goods 
store  at  that  place,  and  the  proposition  had  been  accepted;  it 
would  be  a  marvelous  decision  if  any  court  would  hold  that 
there  was  any  consideration  for  such  a  contract. 

II.  But  it  appears  to  us  that  the  decision  of  the  District 
Court  is  manifestly  right  upon  the  question  that  the  agreement 
is  against  public  policy.  It  plainly  tends  to  monopolize  the 
butter  trade  at  Storm  Lake,  and  destroy  competition  In  that 
business.  It  is  not  necessary  that  the  enforcement  of  the  agree- 
ment would  actually  ereate  a  monopoly  in  order  to  render  it 
invalid,  and  surely,  where  all  the  dealers  in  a  commodity  in  a 
certain  locality  agree  to  quit  the  business,  and  the  plaintiffs 
are  installed  as  the  only  dealers  in  that  line,  the  tendency  is, 
for  a  time  at  least,  to  destroy  competition,  and  leave  the  plain- 
tiffs as  the  only  dealers  in  that  species  of  property  in  that 
locality.     Such  contracts  cannot  be  enforced. 

Affirmed. 


KELLOGG  V.   LARKIN 

(Supreme  Court  of  Wisconsin,  1851.     3  Pinney  123.) 

Error  to  the  County  Court  for  Milwaukee  County. 
Action  of  covenant  for  the  recovery  of  rent. 
Two  pleas  filed  by  the  defendants. 


THE  COMMON  LAW  143 

To  these  the  plaintiff  demurred. 

Joinder  in  demurrer  and  judgment  for  plaintiff  thereon; 
and  the  defendants  brought  this  writ  of  error. 

HOWE,  J.  The  plaintiff  below,  Larkin,  declared  in  covenant 
for  the  rents  reserved  in  a  lease  executed  by  him  to  Kellogg  & 
Webb,  of  one  portion  of  a  certain  warehouse,  situated  in  the 
Fifth  Ward  of  the  City  of  Milwaukee.  The  lease  contained  a 
covenant  on  the  part  of  the  plaintiff  by  which  he  obliged  him- 
self, during  the  term  for  which  the  premises  were  demised,  to 
wit:  from  the  7th  of  January  to  the  1st  day  of  August  follow- 
ing, "not  to  purchase,  store,  or  handle  any  wheat  in  the  Mil- 
waukee market,  except  under  the  direction"  of  the  defendants. 

This  covenant,  as  is  said,  being  in  partial  restraint  of  trade, 
is  prima  facie  bad,  and  should  be  aided  by  an  averment  of 
some  special  circumstances,  showing  a  good  reason,  independent 
of  a  mere  pecuniary  consideration,  to  support  it.  And  the 
want  of  any  such  covenant,  it  is  further  said,  is  a  substantial 
defect  in  the  declaration  which  entitles  the  defendants  to  judg- 
ment upon  the  demurrer^  notwithstanding  the  insufficiency  of 
their  plea. 

The  only  reason  ever  assigned  in  support  of  such  restrictions 
is,  that  they  are  necessary  or  useful  to  the  party  with  whom 
the  contract  is  made,  as  a  protection  to  him  in  the  prosecution 
of  his  business.  And  it  is  not  necessary  that  such  reason  should 
be  expressly  averred,  if  it  sufficiently  appears  from  the  contract 
itself.  Here  the  lease  is  set  forth  at  length  in  the  declaration, 
and  that  sufficiently  discloses  the  interest  which  the  defendants 
had  in  requiring  protection  against  the  competition  of  the 
plaintiff.  And  so  the  interest  or  reason  is  usually  made  to 
appear.  See,  for  instances,  Mitchel  v.  Reynolds,  1  P.  Wms.  181 ; 
Mallan  v.  May,  11  Mees  &  W.  652;  Chappell  v.  Brockway,  21 
Wend.  157. 

I  have  found  no  case  in  which  these  circumstances  or  reasons 
have  been  expressly  averred,  although  it  is  suggested  that  they 
might  be  set  out  by  averment  when  they  did  not  appear  upon 
the  face  of  the  contract.    Ross  v.  Sadgbeer,  21  Wend.  166. 

The  declaration  is  therefore  sufficient  in  substance,  to  support 
the  judgment  of  the  County  Court.  Let  us  consider  if  the  plea 
demurred  to  discloses  a  good  answer  to  that  declaration. 


144    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

This  plea,  in  its  character,  is  quite  original.  I  think  it  would 
be  difBcult  to  say  what  precedent  gave  form  to  it.  But  in  its 
structure  it  is  ingenious;  I  think  it  would  be  quite  as  difficult 
to  say  what  canon  of  good  pleading  was  violated  by  it.  But  I 
have  to  consider,  not  its  form,  but  its  body  in  substance. 

Its  material  averments,  I  think,  may  be  stated  as  follows: 

1.  That  the  lease  declared  upon  "was  made,  entered  into  and 
executed  for  the  further  countenancing  and  proceeding  in  the 
undertakings,  schemes  and  plans  of  the  produce  association," 
of  which  the  parties  to  the  lease  were  severally  members. 

2.  That  the  produce  association  was  composed  of  the  pro- 
prietors of  certain  warehouses,  to  the  number  of  eleven,  and  the 
owners  of  certain  mills  in  the  City  of  Milwaukee. 

3.  That  the  produce  association,  on  the  29th  day  of  Decem- 
ber, 1849,  entered  into  an  agreement  by  which  the  mill  owners 
were  parties  of  the  first  part,  and  the  warehousemen  were  par- 
ties of  the  second  part,  the  prominent  features  of  which  agree- 
ment were  as  follows: 

First.  The  mill  owners  agree  to  pay  the  warehousemen  ' '  four 
cents  per  bushel  commission,  or  storage,  on  each  and  every 
bushel  of  wheat  coming  to  the  Milwaukee  market  to  be  disposed 
of,  by  sale  in  the  street,  or  by  storage  (so  far  as  they  are  able 
to  control  the  same,"  from  that  date  to  the  1st  day  of  August, 
then  next. 

Secand.  The  warehousemen,  in  consideration  thereof,  agree 
"to  give  to  the  parties  of  the  first  part,  full,  absolute  and 
uninterrupted  control  of  the  Milwaukee  wheat  market,  from 
the  date  hereof,  up  to  the  first  day  of  August,  A.  D.  1850,  so 
far  as  they  shall  be  able  to  do  so  by  virtue  of  their  capacity  as 
warehousemen  or  vessel  and  dock  owners;  that  they  will  not 
themselves,  or  through  the  agency  of  others,  directly  or  in- 
directly, under  any  name  or  pretense  whatsoever,  purchase, 
contract  or  bargain  for  any  wheat  in  the  Milwaukee  market, 
from  the  date  hereof,  up  to  the  1st  day  of  August,  A.  D.  1850, 
nor  make  any  contracts  for  the  storage  of  wheat  during  the 
time  aforesaid,  except  as  agents  under  the  direction  and  control 
of  the  parties  of  the  first  part." 

Third.  That  nothing  herein  contained  is  to  give  the  said 
parties  of  the  first  part,   any  right  to  close  the   warehouses 


THE  COMMON  LAW  145 

against  the  storage  of  wheat,  or  to  fix  a  higher  rate  of  storage 
than  4  cents  per  bushel. 

Fourth.  That  "the  parties  of  the  second  part  shall  at  all 
times  hold  themselves  in  readiness  to  purchase,  store  and  de- 
liver, or  ship  wheat  for  account  of  the  parties  of  the  first  part, 
at  the  rate  of  4  cents  per  bushel,  as  aforesaid,"  and, 

Fifth.  That  the  mill  owners  shall  pay  to  the  warehousemen 
4  cents  per  bushel  upon  all  wheat  received  into  the  mills  for 
shipment  or  grinding,  "grist  work  excepted." 

4.  It  is  averred  that  the  objects  and  purposes  of  the  associa- 
tion were  to  carry  out  and  perform  these  agreed  plans  and 
schemes. 

5.  It  is  averred  that  the  association,  its  general  plans,  schemes, 
attempts  and  undertakings,  tended  to  the  manifest  injury  and 
restraint  of  trade,  the  depression  of  the  wheat  market,  to  reduce 
the  price  of  the  commodity  of  wheat  and  to  stifle  fair  and  lawful 
rivalry  and  competition  of  dealers  therein. 

Upon  this  last  averment  a  point  was  raised  upon  the  argu- 
ment, which,  as  it  seems  preliminary  to  the  main  question,  I 
will  here  dispose  of. 

It  was  said  that  because  it  is  expressly  averred  that  the 
"association,  its  agreed  plans,  schemes,"  etc.,  "tended  to  the 
manifest  injury  and  restraint  of  trade,"  etc.,  and  because  the 
truth  of  this  averment  is  admitted  by  the  demurrer,  and  be- 
cause whatever  contracts  do  have  such  tendency,  are  held  to  be 
void  as  contravening  public  policy,  therefore  the  judgment  of 
the  County  Court  should  have  been  for  the  defendants. 

The  answer  to  this  objection  is  manifest.  Undoubtedly  a 
demurrer  admits  the  verity  of  every  fact  well  pleaded;  but  I 
have  to  say,  that  if  the  "agreed  plans  and  schemes"  which  are 
alleged  to  have  such  pernicious  tendency  are  any  other  than 
those  that  are  developed  in  the  articles  of  the  29th  of  Decem- 
ber, 1849,  then  they  are  not  well  pleaded,  and  for  these  two 
reasons : 

1.  Because  (as  I  think)  they  should  be  set  forth  in  terms; 
not  by  describing  their  symptoms  or  effects,  but  stating  their 
essence  and  nature,  leaving  the  court  to  judge  of  their  tend- 
encies and  probable  effects;  and 

2.  Because,  in  such  case,  this  averment  would  be  clearly 
repugnant  to  that  other  averment,  to  wit :  that  the  ' '  objects  and 

Kales  R.  of  T.  Vol.  I— 10 


146    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

purposes  of  which  association  were  to  carry  out  and  perform 
all  the  acts,  plans  and  schemes  contemplated  and  agreed  upon 
in  the  said  article  of  agreement." 

But  doubtless  the  pleader  referred  to  tlie  articles  themselves, 
which  he  sets  forth  in  extenso,  as  developing  the  plans  and 
schemes  alleged  to  be  so  injurious  to  the  public  interests.  The 
agreement  is  therefore  laid  before  the  court  for  construction — • 
to  have  its  character  and  tendencies  determined  by  judicial 
interpretation — not  proved  to  the  satisfaction  of  a  jury. 

Whether  such  an  agreement  existed — whether  the  lease  sued 
upon  grew  out  of  it,  or  was  connected  therewith  so  as  to  be 
tainted  by  it,  if  taint  was  in  it,  were  questions  which,  if  raised, 
must  be  settled  by  a  jury.  But  what  the  agreement  essentially 
was,  and  whether  it  violated  any  law  of  the  land  or  any  rule  of 
public  policy,  were  purely  questions  of  law,  to  be  determined 
by  the  Court.  Therefore  no  averment  could  give  to  the  agree- 
ment a  character  which  it  had  not,  and  no  admission  could  take 
from  it  the  character  which  it  had. 

Millan  v.  May,  11  Mees  &  W.  652,  was  an  action  upon  a 
covenant  not  to  carry  on  the  business  of  a  surgeon  dentist  in 
London,  or  in  any  of  the  places  or  towns  in  England  or  Scot- 
land, where  the  plaintiffs  might  have  been  practicing  within 
four  years,  for  which  term  the  agreement  ran.  Plea  to  the 
second  breach  assigned  that  the  plaintiffs,  before  the  expiration 
of  the  term,  had  practiced  in  many  towns  in  England,  and  that 
divers  of  them  were  distant  from  each  other  one  hundred  and 
fifty  miles;  wherefore  the  said  stipulation  was  an  unreasonable 
restriction  of  trade.  Upon  demurrer,  the  plea  was  held  bad  for 
attempting  to  put  in  issue  a  matter  of  law. 

The  County  Court,  then,  we  think,  properly  assumed  the 
responsibility  of  passing  upon  the  nature  and  effect  of  the 
agreement,  and  I  come  now  to  consider  the  gravest  question 
presented  upon  this  record,  to  wit:  whether  that  court  erred 
in  its  estimate  of  the  character  of  that  agreement. 

The  plaintiffs  in  error  aver  that  this  agreement  "tended  to 
the  manifest  injury  and  restraint  of  trade,  the  depression  of  the 
wheat  market,  to  reduce  the  price  of  the  conmiodity  of  wheat, 
and  to  stifle  fair  and  lawful  rivalry  and  competition  of  dealers 
therein,"  and  this  view  was  enforced  by  an  argument  of  great 
length,  and  exhibiting  much  ingenuity  and  research. 


THE  COMMON  LAW  147 

Before  proceeding  to  discuss  the  question  whether  this  agree- 
ment does  in  fact  contravene  public  policy,  I  desire  to  refer  to 
the  veiy  happy  and  every  way  timely  remarks  of  Mr.  Story. 
He  says:  "Public  policy  is  in  its  nature  so  uncertain  and 
fluctuating,  varying  with  the  habits  and  fashions  of  the  day, 
with  the  growth  of  commerce  and  the  usages  of  trade,  that  it  is 
difficult  to  determine  its  limits  with  any  degree  of  exactness. 
It  has  never  been  defined  by  the  courts,  but  has  been  let  loose 
and  free  from  definition,  in  the  same  manner  as  fraud.  This 
rule  may,  however,  be  safely  laid  down,  that  wherever  any 
contract  conflicts  with  the  morals  of  the  time,  and  contravenes 
any  established  interest  of  society,  it  is  void,  as  being  against 
public  policy."    Story  on  Conf.  Laws,  §  546. 

And  I  desire  to  add  that  as  a  general  rule,  the  immediate 
representatives  of  the  people,  in  legislature  assembled,  would 
seem  to  be  the  fairest  exponents  of  what  public  policy  requires, 
as  being  most  familiar  with  the  habits  and  fashions  of  the  day, 
and  with  the  actual  condition  of  commerce  and  trade,  their 
consequent  wants  and  weaknesses.  And  a  legislative  enactment 
would  seem  to  be  the  least  objectionable  form  of  exposition,  for 
these  two  reasons: 

1.  Because  it  would  operate  prospectively  as  a  guide  to 
future  negotiations,  and  would  not,  like  a  judgment  of  a  court, 
annul  a  contract  already  concluded  in  good  faith,  and  upon  a 
valuable  consideration;  and 

2.  Because  a  rule  so  established  has  a  wider  circulation  among 
the  people,  and  enters  more  generally  into  the  information  of 
the  public. 

I  by  no  means  intend  to  deny  the  right  or  the  propriety  of 
judicially  determining,  that  a  contract  which  is  actually  at  war 
with  any  established  interest  of  society  is  void,  however  in- 
dividuals may  suffer  thereby,  because  the  interest  of  individuals 
must  be  subservient  to  the  public  welfare.  But  I  insist  that 
before  a  court  should  determine  a  contract  which  has  been  made 
in  good  faith  stipulating  for  nothing  that  is  malum  in  se,  noth- 
ing that  is  made  malum,  prohibitum,  to  be  void  as  contravening 
the  policy  of  the  state,  it  should  be  satisfied  that  the  advantage 
to  accrue  to  the  public  for  so  holding  is  certain  and  substantial, 
not  theoretical  or  problematical.  And  I  submit  that  he  is  the 
safest  magistrate  who  is  more  watchful  over  the  rights  of  the 


148    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

individual,  than  over  the  convenience  of  the  public,  as  that  is 
the  best  government  which  guards  more  vigilantly  the  freedom 
of  the  subject,  than  the  rights  of  the  state. 

And  having  ventured  upon  these  few  preliminary  reflections 
I  disclaim  all  aid  from  any  one  of  them  in  the  determination  of 
this  cause,  but  I  affirm,  that,  upon  the  spirit  of  the  letter  of  the 
law,  as  it  has  been  adjudicated  for  one  hundred  and  forty  years, 
the  agreement  disclosed  in  the  plea  of  the  plaintiff  in  error  is 
not  against  public  policy. 

Contracts  against  public  policy  are  divided,  by  Mr.  Story, 
into  seven  classes,  as  follows:  1.  Contracts  in  restraint  of 
trade ;  2.  Contracts  in  restraint  of  marriage ;  3.  Marriage  bro- 
kerage contracts;  4.  Wagers  and  gaming;  5.  Contracts  to 
offend  against  the  laws  and  public  duty;  6.  Usury,  and  7. 
Trading  with  an  enemy. 

This  agreement  clearly  does  not  fall  under  either  of  the  six 
heads  last  above  mentioned.  If  objectionable  at  all,  then  it 
must  be  as  a  contract  in  restraint  of  trade.  In  that  light  alone 
it  was  considered  by  the  counsel  for  the  plaintiffs  in  error  upon 
the  agreement. 

But  contracts  in  restraint  of  trade  are  divided  by  Parker, 
J.,  in  Mitchel  v.  Reynolds,  1  P.  Wms.  181,  into  involuntary  and 
voluntary,  the  former  comprising  restraints  arising  from  either: 
1.  Grants  or  charters  from  the  crown ;  2.  Customs,  or  3.  By' 
laws,  and  the  latter  comprising  those  restraints  which  arise 
from  the  agreement  of  parties. 

When  I  have  said,  then,  that  the  agreement  we  are  consider- 
ing, most  certainly  does  not  present  a  case  of  involuntary 
restraint,  I  think  I  have  dispensed  with  the  necessity  of  ex- 
amining that  large  class  of  cases,  cited  by  counsel  upon  the 
argument,  and  which  arose  upon  royal  grants  and  charters, 
customs  or  by-laws.  These  decisions  rest  upon  reasons  appli- 
cable to  those  cases,  and  different  from  the  reasons  which  have 
entered  into  the  adjudications  upon  cases  of  voluntary  restraint. 

These  latter  cases  are  again  distinguished  as,  first,  General; 
or,  second,  Particular;  as  to  places  or  persons,  or  time. 

A  general  restraint  which  is  defined  to  be  "an  agreement  not 
to  carry  on  a  certain  business  anywhere"  (Story  on  Conf. 
Laws,  §  550)  is  against  public  policy,  and  is  void.  So  it  was 
held  after  several  arguments  in  Mitchel  v.  Reynolds,  supna,  and 


THE  COMMON  LAW  149 

the  doctrine  has  been  affirmed  and  reaffirmed  in  numerous  cases 
since,  and  I  am  not  aware  of  the  propriety  of  the  rule  being 
questioned  in  any  single  case.  Pakker,  J.,  in  Mitchel  v.  Key- 
nolds,  states  the  reasons  upon  which  the  rule  is  founded,  as 
follows : 

"First.  The  mischief  which  may  arise  from  them.  1.  To 
the  party  by  the  loss  of  his  livelihood,  and  the  subsistence  of 
his  family,  2.  To  the  public  by  depriving  it  of  a  useful  mem- 
ber. Another  reason  is  the  great  abuses  these  voluntary  re- 
straints are  liable  to,  as  for  instance,  from  corporations  who 
were  perpetually  laboring  for  exclusive  advantages  in  trade, 
and  to  reduce  it  into  as  few  hands  as  possible ;  as  likewise  from 
masters  who  are  apt  to  give  their  apprentices  much  vexation  on 
this  account,  and  to  use  many  indirect  practices  to  procure  such 
bonds  from  them,  lest  they  should  prejudice  them  in  their 
custom  when  they  come  to  set  up  for  themselves.  3.  Because 
in  a  great  many  instances  they  can  be  of  no  use  to  the  obligee, 
which  holds  in  all  cases  of  general  restraint  throughout  Eng- 
land, for  what  does  it  signify  to  a  tradesman  in  London,  what 
another  does  at  Newcastle?  And  surely  it  would  be  unreason- 
able to  fix  a  certain  loss  on  one  side,  without  any  benefit  to  the 
other." 

I  do  not  notice  here  the  fourth  and  fifth  reasons  assigned, 
because  the  fourth  is  declared  by  the  learned  judge  to  be  in 
favor  of  the  contract,  and  so  opposed  to  the  rule,  and  the  fifth 
applies  to  contracts  with  a  consideration,  which  he  evidently 
supposes  to  be  without  the  rule,  and  which  he  says  the  law  is 
not  so  unreasonable  as  to  declare  void,  ' '  for  fear  of  an  uncertain 
injury  to  the  party." 

Now,  in  applying  the  rule  to  any  given  case,  it  is  important 
that  we  attend  to  the  reasons  upon  which  it  is  founded.  "Whoso 
knoweth  not  the  reason  of  the  law,  knoweth  not  the  law." 

And  in  regard  to  the  reasons  above  stated,  I  have  to  say  that 
I  very  much  question  whether,  here  in  Wisconsin  at  the  present 
time,  and  in  view  of  our  present  social  and  political  position, 
more  than  one  of  them  is  entitled  to  any  considerable  impor- 
tance, in  our  consideration.  The  opportunities  for  employment 
are  so  abundant,  and  the  demand  for  labor  on  all  sides  is  so 
pressing  and  urgent  and  the  supply  so  limited,  that  I  much 
question,  were  we  to  consider  the  subject  as  res  Integra,  if  we 


150    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

should  feel  authorized  to  hold  that  a  man  had  endangered  his 
own  livelihood  and  the  subsistence  of  his  family,  by  an  agree- 
ment which  merely  excluded  him  from  exercising  the  trade  of 
a  blacksmith  or  a  shoemaker,  leaving  all  the  other  departments 
of  mechanical,  agricultural  and  commercial  industry  open  to 
him. 

And  while  we  have  no  privileged  classes  here,  but  little  in- 
dividual, and  less  associated  capital,  and  while  our  resources 
are  so  imperfectly  developed,  while  the  avenues  to  enterprise 
are  so  multiplied,  so  tempting  and  so  remunerative,  giving  to 
labor  the  greatest  freedom  for  competition  with  capital,  per- 
haps, that  it  has  yet  enjoyed,  I  question  if  we  have  much  to 
fear  from  attempts  to  secure  exclusive  advantages  in  trade,  or 
to  reduce  it  to  few  hands. 

While  so  much  more  remains  to  be  done  that  all  hands  can 
do,  I  question  if  the  better  way  to  foster  individual  effort  be 
not  to  secure  it  the  greatest  possible  freedom,  either  to  direct  it 
to  any  particular  calling,  or  to  abandon  that  calling  to  another 
for  an  equivalent. 

And  while  apprentices  are  sought  for  oftener  tlian  they  seek 
apprenticeships,  we  need  hardly  fear,  I  think,  that  they  will  be 
subject  to  greai  vexation  by  their  masters  on  account  of  any 
anticipated  prejudice  to  their  custom.  Besides,  if  such  indirect 
practices  should  be  resorted  to  here  to  obtain  similar  bonds,  as 
Lord  Macclesfield  says  was  the  case  in  his  time,  perhaps  the 
courts  would  find  those  indirect  practices  themselves  as  good 
a  pretext  for  setting  aside  the  bonds  as  any  real  or  fancied 
injury  to  the  public  policy  arising  therefrom  would  afford. 

As  to  the  third  reason,  I  apprehend  it  would  be  thought  a 
dangerous  precedent  were  a  court  to  annul  any  other  voluntary 
bond  for  which  a  voluntary  consideration  has  been  received, 
upon  the  ground  that  it  was  of  no  use  to  the  obligee.  Ordinarily, 
we  say,  let  parties  who  are  competent  to  contract  determine  for 
themselves  what  contracts  will  profit  them.  And  certainly  I 
do  not  understand  why  that  should  be  called  a  certain  loss  on 
one  side  when,  for  what  the  party  has  abandoned,  he  has  re- 
ceived an  ample  equivalent.  If  the  loss  is  supposed  to  arise 
from  a  total  want  of  consideration,  or  from  its  inadequacy, 
these  are  distinct  grounds  for  interference. 

It  is  enough,  however,  that  one  good  reason  still  remains  to 


THE  C0M310N  LAW  151 

uphold  the  rule.  The  loss  to  society  of  a  valuable  member  is 
as  great  a  public  injury  now  as  it  ever  was,  and  as  great  here 
as  anywhere.  I  hope,  indeed,  that  the  market  value  of  a  human 
being  is  higher  now  than  it  was  in  England  at  the  beginning 
of  the  eighteenth  century,  when  the  case  of  Mitchel  v.  Reynolds 
was  decided.  The  capacity  of  an  individual  to  produce  (using 
that  word  in  its  largest  sense)  constitutes  his  value  to  the 
public.  That  branch  of  industry  in  which  a  man  has  been 
educated,  and  to  which  he  is  accustomed,  and  for  the  abandon- 
ment of  which  he  demands  compensation,  is  supposed  to  be  the 
one  in  which  he  can  render  the  greatest  profit.  The  value  of 
what  he  produces  belongs  to  himself.  The  actual  product  be- 
longs immediately  to  him  who  employs  him,  but  mediately  to 
the  state,  and  goes  to  swell  the  aggregate  of  public  wealth. 
Therefore,  the  law  says  to  each  and  every  tradesman:  You 
shall  not,  for  a  present  sum  in  hand,  alien  your  right  to  pursue 
that  calling  by  which  you  can  produce  the  most  and  add  the 
most  to  the  public  wealth,  and  compel  yourself  to  a  life  of 
supineness  and  inaction,  or  to  labor  in  some  department  less 
profitable  to  the  state.  And  if  any  man,  mindful  of  his  own 
gain  alone,  but  not  of  the  public  good,  -v^dll  bargain  with  you  to 
that  effect,  you  are  held  discharged  from  such  bargain,  because 
of  the  advantage  that  will  arise  to  the  public  from  so  holding. 

But  none  of  these  reasons  apply  to  what  are  called  partial  or 
limited  restraints,  or  to  agreements  not  to  exercise  a  particular 
calling  in  a  particular  place.  Indeed  these  seem  to  be  not  so 
much  restraints  upon  trade  as  upon  tradesmen.  For  when  a 
silversmith  obligates  himself  not  to  pursue  that  particular  busi- 
ness in  Milwaukee,  the  trade  need  not  necessarily  be  restrained 
thereby,  for  he  can  pursue  if  he  pleases  in  Racine,  or  elsewhere 
in  the  state;  and  to  all  legal  intendment  with  eqvial  advantage 
to  himself  and  to  the  public.  Accordingly,  such  agreements 
have  uniformly  been  upheld  by  the  courts,  when  founded  upon 
a  sufficient  consideration. 

This  modification  of  the  rule  is  said  to  have  obtained  as  early 
as  1621.     Brand  v.  Joliffe,  Cro.  Jac.  596. 

In  Mitchel  v.  Reynolds,  1  P.  Wms.  181,  the  law  is  declared 
so  to  be,  and  so  to  have  been. 

The  cases  which  have  been  decided  in  accordance  with  this 
doctrine  are  numerous.     I  will  only  instance  Bunn  v.  Guy,  4 


152    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

East,  190;  where  an  attorney  bound  himself  not  to  practice 
within  London  and  one  hundred  and  fifty  miles  from  thence. 
In  Leighton  v.  Wales,  3  Mees  &  W.  545,  the  restraint  was  against 
running  any  coach  on  a  particular  road.  Pierce  v.  Fuller,  8 
Mass.  223;  Palmer  v.  Stebbins,  3  Pick.  188;  Pierce  v.  Wood- 
ward, 6  id.  201 ;  Nolles  v.  Bates,  7  Cow.  307 ;  Chappel  v.  Brock- 
way,  21  Wend.  158;  Perkins  v.  Lyman,  9  Mass.  532;  which 
latter  case  arose  upon  an  agreement  nat  to  be  interested  in  any 
voyage  to  the  northeast  coast  of  America,  or  any  traffic  with  the 
natives  of  that  coast  for  seven  years,  and  the  agreement  was 
adjudged  good. 

Now  it  is  manifest,  that  by  every  known  rule  of  construction, 
the  agreement  exhibited  to  us  in  the  defendant's  plea  is  one 
falling  within  the  principle  of  the  cases  above  cited.  The  re- 
straint it  imposed  upon  trade,  if  any,  was  partial  and  limited; 
limited  in  every  particular  referred  to  in  the  books.  It  was 
limited  as  to  persons,  as  to  object,  as  to  place,  and  as  to  time 
(though  this  last  is  not  essential).  As  to  persons,  it  was 
limited  to  the  proprietors  of  eleven  warehouses ;  as  to  object,  it 
was  limited  to  the  traffic  in  wheat;  as  to  place,  it  was  limited 
to  the  Milwaukee  market ;  and  as  to  time,  to  a  period  of  about 
seven  months. 

It  was  indeed  objected  upon  the  argument  that  there  was 
nothing  upon  the  record  to  show  the  extent  of  the  Milwaukee 
market.  But  surely  this  objection  cannot  be  well  taken.  Ad- 
mitting for  the  purpose  of  the  argument,  the  law  to  be  that  only 
so  much  restraint  upon  the  obligor  will  be  upheld  by  the  courts 
as  shall  appear  to  the  court  to  be  necessary  to  the  protection  of 
the  obligee,  still  the  agreement  is  before  us,  and  if  we  are  to 
construe  it  as  a  contract,  and  with  reference  only  to  the  ap- 
parent intention  of  the  parties,  I  think  we  would  find  no  diffi- 
culty in  holding  that  the  contracting  parties  intended  by  that 
term  to  confine  themselves  to  the  market  in  Milwaukee,  a  city 
which  we  judicially  know  to  exist,  and  the  market  or  place  of 
sale  in  which,  I  think  we  may  legally  infer,  is  not  more  exten- 
sive than  the  boundaries  of  the  city. 

If  on  the  contrary  we  are  to  construe  it  as  a  part  of  the 
plea  in  the  case,  having  reference  to  that  degree  of  certainty 
requisite  in  good  pleading,  I  have  simply  to  remark,  that  what- 
ever is  uncertain  in  this  behalf,  is  the  fault  of  the  plaintiffs  in 


THE  COMMON  LAW  153 

error,  from  whom  the  pleading  comes;  and  because  they  have 
not  averred  the  Milwaukee  market  to  have  an  unreasonable 
extent,  we  are  to  presume  that  it  has  not.  1  Ch.  PI.  345.  In 
either  point  of  view  the  restraint  was  limited,  and  the  limits 
were  reasonable,  . 

But  the  parties  are  said  to  have  combined  and  agreed  not  to  1  f^A  ,  v 
engage  in  trade,  and  that  this  was  clearly  against  public  policy ;  1  ^ 
and  in  the  plea,  the  plaintiffs  and  defendants,  together  with  [ 
divers  other  persons,  are  averred  to  have  formed  themselves  / 
and  entered  into  an  association.    Let  this  matter  be  understood, ' 
and  we  need  not  be  frightened  by  the  terms  employed  to  char- 
acterize it.     The  agreement  discloses  no  combination   and  no 
association  in  the  sense  in  which  the  words  are  evidently  used. 
It  is  of  two  parts.     It  creates  mutual  obligations,  and  provides 
mutual  equivalents,  as  every  contract,  inter  partes,  does.     But 
there  is  no  identity  of  interest  or  of  duty  between  the  parties 
of  the  second  part,  no  more  than  always  exists  between  landlord 
and  tenant.     The  warehousemen  received  their  daily  compen- 
sation, and  the  millers  received  their  daily  profits. 

And  there  was  no  combination  between  the  parties  of  the 
second  part,  the  warehousemen.  Perhaps  they  must  be  consid- 
ered to  have  jointly  promised  the  party  of  the  first  part,  but  it 
is  not  disclosed  that  they  have  promised  each  other,  which  I 
understand  they  must  have  done,  before  they  can  be  said  to 
have  combined. 

Besides,  if  the  design  be  lawful,  as  the  abandonment  of  trade:  ? 
in  a  particular  place  is,  what  matter  how  many  combine  in  it?j 
But  at  all  events,  it  is  said,  that  as  creating  a  particular  re- 
straint, the  contract  is  prima  facie  bad;  and  the  facts  and  cir- 
cumstances which  will  justify  it,  if  any  such  exist,  should  be 
made  to  appear. 

And  upon  this  point,  the  authority  of  Lord  Macclesfield  is 
again  invoked,  who  says  in  Mitchell  v.  Reynolds  that  ' '  a  partic- 
ular restraint  is  not  good,  without  just  reason  and  considera- 
tion." And  again,  "In  all  restraints  of  trade,  where  nothing 
more  appears,  the  law  presumes  them  bad."  Special  circum- 
stances may  exclude  the  presumption,  and  the  court  is  to  judge 
of  those  cirxjumstances,  and  determine  accordingly,  and  if, 
upon  them,  it  appears  to  be  a  just  and  honest  contract,  it  ought 
to  be  maintained. 


154    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

What  were  those  special  circumstances  in  that  very  case? 
Why,  that  the  plaintiff  was  the  assignee  of  a  lease  of  a  messuage 
and  bakehouse  in  Liquor  Pond  street,  in  the  parish  of  St. 
Andrews,  Holbome,  for  the  term  of  five  years.  This  was  held 
a  sufficient  reason  to  support  a  covenant  not  to  exercise  the 
trade  of  a  baker  within  that  parish  during  the  said  term. 

What  are  the  special  circumstances  in  this  case  ?  The  obligees 
are  the  proprietors  of  several  mills  in  the  City  of  Milwaukee, 
for  the  manufacture  of  wheat  into  flour.  Will  any  one  presume 
to  say  here  is  not  as  good  a  reason  for  upholding  a  promise  not 
to  traffic  in  wheat  in  Milwaukee,  to  the  prejudice  of  these  pro- 
prietors, for  the  term  of  seven  months? 

But  how  should  these  special  circumstances  be  made  to  ap- 
pear? By  averment  in  the  pleadings  and  by  proof  upon  the 
trial  ?  Certainly  not.  It  was  not  so  in  the  case  just  cited.  They 
appeared  upon  the  face  of  the  instrument  sued  upon,  by  way 
of  preamble  to  the  conditions,  were  set  out  on  prayer  of  oyer, 
and  the  question  arose  upon  demurrer  to  the  declaration. 

Here  these  circumstances  appear  in  the  agreement  which  is 
set  out  in  the  plea,  and  the  question  arises  upon  demurrer  to 
the  plea. 

It  is  insisted  further  that  the  contract  of  the  29th  December, 
1849,  discloses  an  attempt  to  create  a  monopoly  of  the  wheat 
market.  And  in  support  of  this  position  we  are  again  referred 
to  the  leading  case. 

"It  may  be  useful,"  says  Parker,  J.,  "and  lawful  to  restrain 
him  from  trading  in  some  places,  unless  he  intends  a  monopoly, 
which  is  a  crime." 

But  the  word  monopoly  is  used  to  signify  something  which  is 
very  different  from  aught  that  could  have  been  intended  by  this 
contract.  The  learned  judge  himself  interprets  it  in  another 
part  of  the  same  opinion.  He  says,  "that  to  obtain  the  sole 
exercise  of  any  known  trade  throughout  England  is  a  complete 
monopoly,  and  against  the  policy  of  the  law."  He  adds  that 
when  restrained  to  particular  places  or  persons,  if  lawfully 
and  fairly  obtained,  the  same  is  not  a  monopoly. 

Now  could  the  parties  possibly  have  intended  by  this  simple 
contract,  to  vest  in  the  mill  owners  the  sole  exercise  of  the 
traffic  in  wheat,  throughout  the  State  of  Wisconsin?  If  so, 
there  was  the  most  extraordinary  disproportion  of  means  to  the 


THE  COMMON  LAW  155 

end  ever  betrayed  in  the  negotiations  of  business  men.  But 
they  intended  nothing  of  the  kind.  Not  even  a  monopoly  of  the  ^ 
market  in  Milwaukee.  On  the  contrary,  these  mill  owners  who 
desired  to  purchase  wheat  for  manufacturing,  evidently  sought 
to  protect  themselves  against  the  competition  (doubtless  often 
sharp  and  injurious)   of  the  warehousemen. 

The  obligors  possessed  large  facilities  as  warehousemen,  ves- 
sel and  dock  owners,  for  storing  and  freighting  the  produce 
which  came  to  that  market.  Their  interests  led  them  to  deal  in 
that  produce  in  the  bulk,  because  so  it  would  pay  the  most 
storage  and  the  most  freight.  On  the  other  hand,  to  give  employ- 
ment to  their  mills,  the  obligees  sought  the  same  produce  for 
manufacture.  Here  their  interests  clashed.  The  contract  before 
us  is  the  result  of  a  compromise  of  those  conflicting  interests. 
And  if  the  argument  needed  any  such  beggarly  support,  I 
think  it  might  well  be  asked  if  the  public  interests  were  not 
promoted,  rather  than  prejudiced  by  an  arrangement  which 
saved  to  the  wealth  of  our  state,  the  earnings  from  the  manu- 
facture of  so  large  a  quantity  of  wheat  as  we  may  reasonably 
suppose  to  have  been  floured  in  the  Milwaukee  mills,  and  which, 
but  for  this  arrangement,  would  have  been  floured  in  the  mills 
of  some  eastern  state. 

I  waive  this  consideration.     I  say  there  was  no  monopoly  in- 
tended, none  effected.    We  cannot  fail  to  perceive,  that  in  spite 
of  this  contract,  all  the  rest  of  Wisconsin  was  an  open  and 
unrestricted  market  for  the  sale  of  wheat.     And  even  in  Mil- 1 
waukee,  the  market  was  open  to  the  fiercest  competition  of  all  \ 
the  world,  except  these  obligors. 

True,  the  language  of  the  contract  is,  that  the  parties  of  the 
second  part,  "agree  to  give  the  parties  of  the  first  part,  full, 
absolute  and  uninterrupted  control  of  the  Milwaukee  wheat 
market ; ' '  and  had  it  stopped  here  it  might  well  have  been  urged 
that  there  was  an  agreement  for  a  monopoly  of  the  trade  in 
that  market.  And  if  that  had  been  the  only  market  for  Wiscon- 
sin (which  it  is  not),  it  might  well  be  said  the  agreement  was 
as  pernicious  as  an  agreement  to  strike  the  sun  from  the  system. 
Either,  if  performed,  would  be  ruinous  to  the  farmers  of 
Wisconsin;  but  I  submit  that  the  impossibility  of  performing, 
would  constitute  as  good  a  reason  for  holding  either  of  them 
void,  as  the  injurious  consequences  certain  to  result  from  per- 


156    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

formance.  But  this  stipulation  is  qualified  by  adding  the 
words,  "so  far  as  they  shall  be  able  to  do  so,"  and  had  they 
stopped  here,  to  any  objection  that  a  monopoly  was  agreed  upon, 
it  might  well  be  answered,  that  the  giving  of  such  control  or 
such  monopoly  (if  they  are  synonymous  terms),  of  the  Mil- 
waukee wheat  market  as  those  parties  could  give,  was  no  mo- 
nopoly at  all.  But  the  agreement  is  still  further  limited  by  the 
words,  "by  virtue  of  their  capacity  of  warehousemen,  vessel 
and  dock  owners." 

It  is  then  simply  an  agreement  to  give  to  the  mill  owners, 
such  control  of  that  market  as  they  can  give  by  virtue  of  those 
specified  employments.  In  other  and  equivalent  terms,  it  is  a 
transfer  of  such  control  as  the  obligors  possessed  in  right  of 
their  employment  as  warehousemen,  etc.  Such  are  the  general 
terms  selected  by  the  draftsmen  to  express  the  complete  aban- 
donment of  that  trade  in  that  market  to  the  obligees. 

Personally,  the  obligors  were  to  do  nothing  to  confirm  the 
mill  owners  in  that  trade  to  the  exclusion  of  anybody  but  them- 
selves. Accordingly  they  go  on  to  render  the  nature  and 
meaning  of  the  stipulation  more  definite,  by  specifying  several 
things  which  the  parties  of  the  second  part  shall  not  do,  but  not 
one  which  they  shall  do. 

It  is  unnecessary  to  examine  the  cases  cited  by  counsel  in 
support  of  the  proposition  I  have  here  been  combatting.  They 
all  arose  upon  royal  grants  or  by-laws,  and  consequently  were 
cases  of  involuntary  restraints.  They  do  establish  the  doctrine 
that  the  grant  of  a  monopoly  is  void;  but  they  do  not  support 
the  averment  of  the  plaintiff  in  error,  that  this  contract  disclosed 
a  monopoly.  Upon  this  point,  better  authority  may  be  found 
in  the  language  used  by  Bronson,  J.,  in  Chappell  v.  Brockway, 
21  Wend,  157.  To  a  similar  averment,  he  replied:  "The  de- 
fendant can  gain  nothing  by  giving  the  transaction  a  bad  name, 
unless  the  facts  of  the  case  will  bear  him  out.  He  calls  this  a 
monopoly.  That  is  certainly  a  new  kind  of  monopoly  which 
only  secures  the  plaintiff"  in  the  exclusive  enjoyment  of  his 
business  as  against  a  single  individual,  while  all  the  world 
beside  are  left  at  full  liberty  to  enter  upon  the  same  enter- 
prise. ' ' 

But  the  crowning  objection  urged  against  the  validity  of  this 
agreement  is,  that  it  tends  "to  depress  the  wheat  market;  to 


THE  COIVOION  LAW  157 

reduce  the  price  of  the  commodity  of  wheat,  and  to  stifle  the 
fair  and  lawful  rivalry  and  competition  therein."     It  is  quite 
observable  that  the  word  "stifle"  is  used  more  adroitly  than  ^ 
aptly.    But  if  its  use  is  insisted  upon,  I  admit  that  it  does  tend 
to  stifle  the  competition  of  these  obligors,  and  I  assert  that  the 
right  to  stifle  competition  by  contract,  so  far  as  it  is  injurious 
to  the  parties  contracting,  has  not  before  been  denied  or  ques- 
tioned for  two  hundred  years,  unless  two  cases  reported  in  4 
Denio  349,  and  5  Denio  434,  are  to  be  considered  as  denying  \ 
the  right.     Nor  can  I  perceive  how  this  agreement  can  reduce  • 
the  price  of  wheat,  below  its  actual  market  value. 

Wheat,  being  an  article  of  almost  universal  consumption,  has 
a  market  everywhere,  and  a  value  in  every  market.  And  that 
value  in  any  particular  place  is  determined,  less  by  the  number 
of  purchasers  in  that  place,  than  by  its  distance  from,  and 
means  of  communication  with  the  great  central  markets  of  the 
country  and  of  the  world.  It  is  fluctuating  to  be  sure,  but 
usually  it  is  very  accurately  ascertained,  and  well  understood 
by  the  people.  And  I  cannot  suppose  that  the  agreement  of 
those  warehousemen  not  to  purchase  that  great  staple  upon 
their  own  account  would  affect  its  value,  more  than  the  agree- 
ment of  so  many  brokers  not  to  take  foreign  gold  in  a  particular 
place  would  diminish  the  current  value  of  such  coin.  Even  if 
this  contract  had  removed  all  competition  from  that  market,  and 
the  mill  owners  had  taken  advantage  of  that  exemption  to  lower 
their  bids,  one  of  two  results  must  have  followed.  Either  that 
product  would  have  been  wholly  driven  from  the  market,  or 
new  competitions  would  have  entered  the  field  to  purchase. 
Either  result  would  have  defeated  the  very  object  which  the 
parties  had  in  view.  It  was  said,  indeed,  upon  the  argument, 
that  foreign  capital  was  excluded  from  the  market  by  this  con- 
tract, because  the  essential  facilities  of  trade  were  denied 
thereto.  But  the  agreement  will  not  warrant  any  such  inter- 
pretation. On  the  contrary,  the  power  to  close  the  warehouses 
against  the  storage  of  wheat,  or  to  demand  exorbitant  prices 
therefor  is  denied  to  the  obligees  by  the  express  terms  of  the 
instrument. 

Numerous  cases  were  cited  upon  the  argument  in  support  of 
this  last  averment.  Few  of  them,  however,  bear  any  analogy 
to  the  case  before  us.     Most  of  those  cases  arose  upon  secret 


ii 


158    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

agreements  not  to  bid  at  auction  sales,  or  upon  the  employment 
of  secret  bidders.  All  such  secret  arrangements  are  very  prop- 
erly discountenanced  by  the  courts,  and  forbidden  by  the  law. 
They  are  frauds  upon  the  party  who  is  uninformed  of  them  and 
Avho  acts  in  good  faith. 

When  a  man  publicly  offers  his  property  to  the  highest  bidder 
at  an  auction  sale,  thereby  obligating  himself  to  take  the  highest 
sura  offered  for  it,  however  disproportioned  that  sum  may  be  to 
its  actual  worth,  it  seems  very  reasonable  that  he  should  be 
protected  against  secret  agreements  between  the  bidders,  by 
which  one  may  be  enabled  to  make  the  purchase  upon  his  own 
terms.  No  such  consequence  could  follow  the  making  of  the 
contract  we  are  considering,  for  the  simple  reason  that  the 
obligees  were  not  enabled  thereby  to  purchase  a  bushel  of  wheat 
unless  they  offered  a  price  for  it  which  the  vendor  chose  to  take. 

But  the  distinction  between  the  case  at  bar,  and  the  case 
referred  to,  is  too  apparent  to  require  illustration.  And  I 
would  not  have  felt  called  upon  to  notice  those  cases  at  all,  but 
that  they  have  been  supposed  to  sustain  two  other  decisions 
pronounced  by  the  Supreme  Court  of  New  York,  and  which  are 
claimed  by  the  plaintiffs  in  error  to  be  entirely  decisive  of  the 
main  question  presented  upon  this  record.  I  refer  to  the  cases 
of  Hooker  v.  Vaiiderwater,  4  Denio  349,  and  Stanton  v.  Allen, 
5  id.  434.  These  eases  arose  upon  contracts  between  different 
transportation  companies  upon  the  Erie  canal,  by  which  the 
parties  agreed  to  stock  their  capital,  and  turn  their  earnings 
into  a  common  fund,  to  be  then  apportioned  between  the  dif- 
ferent proprietors,  under  certain  regulations  contained  in  the 
articles  of  agreement. 

The  purpose  assigned  for  the  arrangement  was  the  establish- 
ing of  fair  and  uniform  rates  of  freight,  so  equalizing  the  busi- 
ness among  themselves  as  to  avoid  all  unnecessary  expense  in 
doing  the  same.  In  the  case  first  mentioned,  the  agreement  was 
held  to  be  void  as  conflicting  with  a  statute  of  that  state.  In 
the  second  case  the  same  court  held  the  agreement  void  at  com- 
mon law.  In  the  former  case,  Jewett,  J.,  remarks:  "It  is  a 
familiar  maxim  that  competition  is  the  life  of  trade.  It  follows 
that  whatever  destroys  or  even  relaxes  competition  in  trade  is 
injurious,  if  not  fatal  to  it."  And  in  the  latter  case,  Mc- 
KissocK,  J.,  observes  that:     "While  the  introductory  terms  of 


THE  COM^ION  LAW  159 

the  agreement  proposed  nothing  apparently  objectionahle,  the 
ultima-te  object  is  very  manifest,  and  is  of  a  different  character. 
It  is  nothing  less  than  the  attainment  of  an  exemption  of  the 
standard  of  freights,  and  the  facilities  and  accommodations  to 
be  rendered  to  the  public  from  the  wholesome  influence  of 
rivalry  and  competition."  And  again:  "As  the  canals  are  the 
property  of  the  state,  constructed  at  great  expense,  as  facilities 
to  trade  and  commerce,  and  to  foster  and  encourage  agriculture, 
and  are  at  the  same  time  a  munificent  source  of  revenue,  what- 
ever concerns  their  employment  and  usefulness  deeply  involves 
the  interests  of  the  whole  state.  If  then,  in  addition  to  the 
evils  already  pointed  out,  as  incident  to  this  confederacy,  a 
diminution  of  the  revenue  of  the  state  would  follow,  of  which 
there  can  be  no  doubt,  as  our  canals  have  rivals  by  no  means 
impotent,  in  the  great  inland  carrying  trade  of  the  north  and 
west,  the  question  whether  the  association  can  be  upheld,  be- 
comes one  of  momentous  import." 

Such  reasons  are  assigned  in  support  of  the  judgments  pro- 
nounced in  those  cases.  I  would  be  reluctant  to  subscribe  to 
them.  I  think  it  would  be  unsafe  to  adopt  as  a  rule  of  law, 
every  maxim  which  is  current  in  the  counting  room.  It  was 
said  some  three  hundred  years  ago,  that  trade  and  traffic  were 
the  life  of  every  commonwealth,  especially  of  an  island.  City 
of  London's  Case,  8  Co.  125. 

If  it  be  true,  also,  that  competition  is  the  life  of  trade,  it  may 
foUow  such  premises,  that  he  who  relaxes  competition  commits 
an  act  injurious  to  trade ;  and  not  only  so,  but  he  commits  an 
overt  act  of  treason  against  the  commonwealth.  But  I  app^re- 
hend  it  is  not  true  that  competition  is  the  life  of  trade.  On^ 
the  contrary,  that  maxim  is  one  of  the  least  reliable  of  the  host 
that  may  be  picked  up  in  every  market  place.  It  is  in  fact  the 
shibboleth  of  mere  gambling  speculation,  and  is  hardly  entitled 
to  take  rank  as  an  axiom  in  the  jurisprudence  of  this  country. 
I  believe  universal  observation  wall  attest  that  for  the  last 
quarter  of  a  century,  competition  in  trade  has  caused  more 
individual  distress,  if  not  more  public  injury,  than  the  want  of 
competition. 

Indeed,  by  reducing  prices  below  or  raising  them  above 
values  (as  the  nature  of  the  trade  prompted),  competition  has 
done  more  to  monopolize  trade,  or  to  secure  exclusive  advan- 


160    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

tages  in  it,  than  has  been  done  by  contract.  Rivalry  in  trade 
will  destroy  itself,  and  rival  tradesmen  seeking  to  remove  each 
other  rarely  resort  to  contract  unless  they  find  it  the  cheapest 
mode  of  putting  an  end  to  the  strife.  And  it  seems  to  me  not 
a  little  remarkable  that  in  the  case  of  Stanton  v.  Allen,  5  Denio 
434,  it  should  have  been  urged  against  the  agreement,  that  its 
object  was  to  exempt  the  standard  of  freights,  etc.,  from  the 
wholesome  influence  of  rivalry  and  competition.  For  it  is  very 
certain  that  because  of  that  very  purpose,  because  they  did  tend 
to  protect  the  party  against  the  influence  of  rivalry  and  com- 
petition, courts  of  law  have  upheld  like  agreements  in  partial 
restraint  of  trade,  ever  since  the  case  of  Mitchell  v.  Reynolds, 
supra,  was  decided.  And  upon  the  argument  of  this  cause  it 
was  earnestly  contended  that  some  such  object  should  have  been 
expressly  averred  by  the  plaintiff  in  his  declaration,  in  order 
to  support  the  restraint  imposed  upon  the  lessor  by  one  of  the 
covenants  in  the  lease  declared  upon. 

But  upon  the  abstract  question  whether  the  agreements  dis- 
closed in  those  cases  did  contravene  public  policy,  the  decisions 
therein  pronounced  are  entirely  conclusive  upon  us.  And  if 
the  policy  of  that  great  state  imposes  upon  her  citizens  the 
obligation  of  unrestrained  and  unrelenting  competition  in  the 
business  of  transportation  upon  her  canals,  in  order  to  swell 
the  revenues  from  that  already  munificent  source,  I  have  nothing 
to  urge  against  it. 

I  am  not  sure  I  should  have  discovered  the  rule  applied  in 
the  determination  of  those  cases,  had  it  not  been  disclosed  to  me 
by  the  high  authority  of  that  court.  Entertaining  the  views  I 
do  of  the  extreme  caution  to  be  observed  in  setting  aside  bona 
fide  contracts  in  behalf  of  pubUc  policy,  I  am  not  sure  I  should 
have  found,  as  a  legal  presumption,  that  when  the  parties  to 
those  contracts  had  combined  their  efforts  and  capital  in  order 
to  diminish  their  expenses  and  increase  their  profits,  they  would 
have  so  abused  the  advantages  thereby  secured  as  to  drive  the, 
carrying  trade  into  the  hands  of  those  potent  rivals,  and  thus 
sacrifice  all  profit. 

But  entirely  controlling  as  those  judgments  are  upon  the 
question  decided,  they  are  far  from  being  decisive  of  the  case 
before  us;  for  those  agreements  are  broadly  distinguished  from 
the  one  I  am  considering,  in  the  following  characteristics:    The 


THE  COMMON  LAW  161 

theater  upon  which  the  restraint  was  imposed  by  those  contracts 
was  the  property  of  the  state,  was  built  by  the  state,  from  which 
the  state  received  the  revenues.  Here  the  theater  is  the  City 
of  Milwaukee,  from  which  the  state  receives  no  revenue  except 
what  is  derived  from  ordinary  taxation.  There  the  theater  was 
the  only  one  within  the  state  affording  like  facilities  to  the 
same  trade.  Here  the  City  of  Milwaukee  is  only  one  (though 
doubtless  the  most  considerable)  of  very  many  markets  within 
the  state  for  the  sale  of  wheat.  There  the  combination  com- 
prised, in  one  case,  a  large  portion,  and,  in  the  other,  all  the 
facilities  employed  upon  the  canal.  Here  the  record  does  not 
inform  us  what  portion  of  the  facilities  for  the  wheat  trade 
existing  in  Milwaukee  are  placed  under  the  control  of  the  mill 
owners.  There,  an  unlimited  power  was  reserved  to  raise  the 
price  of  transportation.  Here  the  right  to  increase  the  price 
of  storage  above  4  cents  per  bushel  is  expressly  denied. 

Because,  therefore,  the  restraint  imposed  by  this  agreement 
is  limited  and  reasonable,  and  because  it  is  supported  by  a  good 
consideration,  in  the  judgment  of  this  court,  the  same  does  not 
contravene  public  policy,  is  not  void;  and  the  judgment  of  the 
County  Court  must  be  afi&rmed. 


TRENTON  POTTERIES  CO.  v.  OLIPHANT 

(Court  of  Errors  and  Appeals  of  New  Jersey,  1899.     58  N.  J. 

Eq.  507.) 

Appeal  from  Court  of  Chancery. 

MAGIE,  C.  J.  The  appeal  in  this  cause  is  from  a  decree  of 
the  Court  of  Chancery,  made  upon  the  advice  of  Vice  Chan- 
cellor Grey,  dismissing  appellant's  bill  of  complaint,  and 
denying  the  relief  sought  thereby. 

The  pleadings  in  the  cause,  the  issues  presented,  and  the  facts 
established  by  the  proofs,  are  set  out  with  such  completeness  in 
the  opinion  of  the  learned  vice  chancellor,  and  the  statement 
preceding  it,  reported  in  56  N.  J.  Eq.  680,  39  Atl.  923,  that  it 
is  unnecessary  to  repeat  them  here. 

The  bill  was  filed  by  appellant  against  the  seven  defendants 
and  respondents  to  restrain  the  breach  of  contracts  alleged  to 

Kales  R.  of  T.  Vol.  I— 11 


162    COMBINATIONS  AND  RESTRAINT  OF  TRADll 

to  have  been  made  by  them  with  it.  It  was  dismissed  as  to  all 
the  respondents  upon  the  ground  that  the  contracts  in  question 
were  in  illegal  restraint  of  trade,  and  against  the  public  policy 
of  the  state.  As  to  three  of  respondents,  the  dismissal  was  also 
put  on  other  grounds.  As  to  James  V.  Oliphant,  one  of  respond- 
ents, one  additional  ground  was  that  he  had  not  become  bound 
to  appellant  by  any  such  contract.  As  to  him,  and  also  as  to 
Richard  C.  and  Henry  D.  Oliphant,  also  respondents,  the  addi- 
tional ground  for  dismissal  was  that  the  proofs  disclosed  no 
breach  of  the  contracts  on  their  parts. 

The  appeal  is  from  the  whole  decree,  but  counsel  for  appel- 
lant conceded  in  the  argument  that,  although  Richard  C.  and 
Henry  D.  Oliphant  were  proved  to  have  been  bound  to  ap- 
pellant by  the  contracts  which  the  bill  sought  to  enforce,  yet 
that  no  sufficient  evidence  of  any  breach  of  those  contracts  by 
them  appeared.  It  results  that  so  much  of  the  decree  as  dis- 
misses the  bill  as  to  them  must  be  affirmed. 

But  appellant  contends  that  the  dismissal  of  the  bill  as  to 
James  V.  Oliphant  cannot  be  supported  upon  the  additional 
grounds  assigned  therefor.  This  contention  requires  a  review 
of  the  proofs  touching  the  relation  of  James  V.  Oliphant  to  the 
contracts  in  question,  which  were  contracts  to  abstain  from  the 
manufacture  of  pottery  ware.  The  first  contract  claimed  was 
contained  in  a  letter  addressed  to  one  Tapscott,  dated  January 
23,  1891,  and  signed,  "Oliphant  &  Co.,"  which  is  set  out  in  the 
prefatory  statement  of  the  vice  chancellor.  The  other  contract 
relied  on  was  contained  in  a  sealed  instrument  dated  July  6, 
1892,  purporting  to  be  made  between  the  seven  respondents 
and  Tapscott,  also  to  be  found  in  that  statement.  This  writing 
was  executed  by  all  the  respondents  except  James  V.  Oliphant. 

The  proofs  show  that,  at  the  date  of  the  letter  in  question, 
James  V.  Oliphant  was  not  a  member  of  the  firm  of  Oliphant 
&  Co.  He  became  a  member  about  January  1,  1892.  The  letter 
gave  Tapscott  an  option  to  purchase  at  a  stated  price  the  pot- 
tery business  carried  on  by  Oliphant  &  Co.,  including  the  real 
estate,  plant,  and  good  will,  which  option  was  to  be  exercised 
within  a  limited  period.  That  period  had  expired  when  James 
V.  Oliphant  became  a  member  of  the  firm.  On  February  1, 
1892,  all  the  members  of  the  firm,  including  James  V.  Oliphant, 
signed  a  writing,  addressed  to  Tapscott,  extending  the  option 


THE  COIVOION  LAW  163 

orig-inally  given  for  a  period  of  90  days.  The  option  was 
accepted  by  him  on  May  20,  1892.  On  May  21,  1892,  an  agree- 
ment of  sale  was  signed  by  all  the  members  of  the  firm  except 
James  V.  Oliphant.  But  on  May  23,  1892,  he  executed  under 
seal  a  memorandum  of  agreement  to  the  terms  and  conditions 
mentioned  in  the  agreement  of  the  other  owners  of  the  property 
which  was  the  subject  of  the  sale.  The  sale  was  consummated 
on  June  6,  1892.  Tapscott  was  acting  in  the  transaction  for 
those  who  formed  the  corporation  which  is  the  appellant,  and 
for  that  coi'poration  after  its  formation  on  May  27,  1892.  Ap- 
pellant acquired  all  Tapscott 's  rights  in  the  contracts  with 
respondents. 

The  vice  chancellor  reached  the  conclusion  that  the  bill  should 
be  dismissed  as  to  James  V.  Oliphant,  because,  not  having 
executed  the  sealed  instrument  of  July  6,  1892,  he  had  not 
become  bound  by  its  covenants,  and  because  the  contract  of  the 
letter  of  January  23,  1891,  adopted  and  ratified  by  him  by  his 
joining  in  the  extension  of  the  option  by  the  writing  of  Feb- 
ruary 1,  1892,  was  a  joint,  and  not  a  several,  contract,  and 
merely  bound  the  firm  of  Oliphant  &  Co.  not  to  engage  in  a 
competitive  business. 

The  omission  of  James  V.  Oliphant  to  execute  the  instru- 
ment of  July  6,  1892,  unquestionably  deprives  appellant  of  any 
right  to  enforce  its  provision  against  him  in  this  cause. 

If  necessary  to  construe  the  contract  contained  in  the  letter 
of  January  23,  1891,  I  think  it  would  be  difficult,  if  not  im- 
possible, to  hold  it  to  be  a  mere  partnership  undertaking.  No 
doubt,  an  obligation  entered  into  by  more  than  one  person  is 
presumed  to  be  joint,  and  a  several  responsibility  will  not  arise, 
except  by  words  of  severance.  Alpaugh  v.  Wood,  53  N.  J. 
Law  638.  But  the  purpose  of  this  letter  was  to  give  an  option 
to  purchase  a  business  carried  on  by  individuals  who  were 
partners.  It  recites  that  "we,  the  undersigned,"  do  business 
under  a  firm  name,  and  own  and  control  the  Delaware  Pottery, 
which  was  the  subject  of  the  offer  to  sell.  It  contains  an  agree- 
ment that  in  case  of  sale  "we  will  not,  directly  or  indirectly," 
engage  in  a  competitive  business.  In  my  judgment,  it  would 
not  be  an  unnatural  or  strained  construction  to  attribute  to 
these  words  a  several  force,  and  to  find  that  the  firm  signature 
thereto  bound  the  members  of  the  firm,  not  merely  jointly,  but 


164    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

also  severally.  Upon  any  other  construction,  it  is  obvious  that 
the  protection  of  the  business  and  good  will  proposed  to  be  sold 
would  only  be  partially  secured. 

But  we  are  not  required  to  construe  the  terms  of  the  letter  by 
themselves.  By  the  extension  of  the  option  by  the  writing 
executed  by  all  the  firm  members,  including  James  V.  Oliphant, 
on  February  1,  1892,  a  several  quality  in  the  contract  contained 
in  that  letter  either  was  recognized  as  originally  in  it,  or  was 
imparted  to  it.  By  that  instrument  each  partner  agreed  to  an 
option  of  purchase  for  a  fixed  period,  and  that  such  agreement 
should  be  part  of  the  original  option  given  by  that  letter.  When 
they  all  executed  that  instrument,  and  declared  that  it  was  to 
be  attached  to,  and  become  part  of,  the  original  option,  the  then 
owners  made  a  new  contract  in  the  terms  of  the  former  contract, 
which  bound  those  signing  as  if  they  had  signed  the  original 
option  with  the  extended  term.  The  contracts  thus  amal- 
gamated stipulated  that  in  the  event  of  sale  "we  will  not, 
directly  or  indirectly,"  engage  in  a  competitive  business.  These 
words,  over  individual  signatures  respecting  a  business  pre- 
viously averred  to  be  a  partnership  business,  indicate  several  as 
well  as  joint  undertakings.  It  is  as  if  they  undertook  that  they 
would  not  directly  by  their  joint  act  as  a  firm,  or  indirectly  by 
any  several  act  of  any  member,  engage  in  a  competitive  busi- 
ness. This  construction  is  greatly  aided  by  the  exception  from 
the  undertaking,  whereby  the  proposing  vendors  are  permitted 
to  engage  in  the  business  of  manufacturing  pottery  ware  as 
agents  or  employees  of  the  proposing  purchaser.  These  words 
indicate  a  relation  which  might  be  formed  between  vendors  and 
purchaser  in  case  of  sale  effected.  While  the  firm  could  become 
the  purchaser 's  agent,  it  could  not  in  any  other  sense  become  his 
employee.  Individual  members  of  the  firm  might  become  either 
agents  or  employees.  The  exception  therefore  indicates  that 
the  contract  it  limited  was  one  affecting  individual  members  of 
the  firm. 

As  James  V.  Oliphant,  upon  this  construction,  became  bound 
by  the  contract,  and  as  the  proofs  show  that  he  had  broken  it, 
the  decree  dismissing  the  bill  as  to  him  cannot  be  supported  on 
this  ground. 

It  is  next  to  be  considered  whether  the  decree  can  rest  upon 


THE  COMMON  LAW  165 

the  ground  that  the  contracts  sought  to  be  enforced  are  in 
illegal  restraint  of  trade. 

The  contract  contained  in  the  letter  of  January  23,  1891,  and 
the  covenant  of  June  6,  1892,  are  the  obligations  which  the  bill 
was  filed  to  enforce.  They  are  identical  in  terms,  and  purport 
to  bind  respondents  to  absolutely  refrain  from  engaging  in  the 
business  of  manufacturing  pottery  ware  "within  any  state  in 
the  United  States  of  America,  or  within  the  District  of  Colum- 
bia, except  in  the  State  of  Nevada  and  the  Territory  of  Arizona, 
for  the  period  of  fifty  years."  They  are  contracts  in  restraint 
of  trade. 

This  Court,  speaking  by  Chief  Justice  Beasley,  more  than 
30  years  ago,  declared  that  contracts  in  general  restraint  of 
trade  are  illegal.  Brewer  v.  Marshall,  19  N.  J.  Eq.  537.  The 
learned  chief  justice  found  that  to  have  been  the  undisputed 
rule  of  the  English  and  of  our  own  courts  since  the  decision,  in 
1711,  of  Mitchel  v.  Reynolds,  1  P.  Wms.  181.  In  that  celebrated 
case  Lord  Macclesfield  placed  the  illegality  of  such  contracts 
upon  the  sole  ground  of  their  being  inimical  to  the  public  in- 
terest or  public  policy.  To  the  same  origin  the  rule  denying 
validity  to  such  contracts  was  attributed  by  the  chief  justice  in 
our  leading  case  above  cited.  Our  Court  of  Chancery  has  an- 
nounced and  applied  the  rule,  and  upon  the  same  ground. 
Mandeville  v.  Harman,  42  N.  J.  Eq.  185;  Sternberg  v.  O'Brien, 
48  N.  J.  Eq.  370 ;  Althen  v.  Vreeland,  36  Atl.  479. 

In  determining  what  is  the  public  policy  in  this  regard,  we 
have,  however,  to  take  into  account  certain  contracts  which 
restrain  trade.  It  is  of  public  interest  that  every  one  may 
freely  acquire  and  sell  and  transfer  property  and  property 
rights.  A  tradesman,  for  example,  who  has  engaged  in  a 
manufacturing  business,  and  has  purchased  land,  installed  a 
plant,  and  acquired  a  trade  connection  and  good  will  thereby, 
may  sell  his  property  and  business,  with  its  good  will.  It  is  of 
public  interest  that  he  shall  be  able  to  make  such  a  sale  at  a 
fair  price,  and  that  his  purchaser  shall  be  able  to  obtain  by  his 
purchase  that  which  he  desired  to  buy.  Obviously,  the  only 
practical  mode  of  accomplishing  that  purpose  is  by  the  vendor's 
contracting  for  some  restraint  upon  his  acts,  preventing  him 
from  engaging  in  the  same  business  in  competition  with  that 
which  he  has  sold.     His  contract  to  abstain  from  engaging  in 


166    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

such  competitive  business  is  a  contract  in  restraint  of  trade,  but 
one  which,  from  the  time  of  Mitchel  v.  Reynolds  to  this  time, 
has  been  recognized  as  not  inimical  to,  but  permitted  by,  public 
policy.  Therefore,  while  the  public  interest  may  be  that  trade 
in  general  shall  not  be  restrained,  yet  it  also  permits  and  favors 
a  restraint  of  trade  in  certain  cases. 

Contracts  of  this  sort,  which  have  been  sustained  and  enforced 
by  courts,  have  been  generally  declared  to  be  such  as  restrain 
trade — not  generally,  but  only  partially,  and  no  more  exten- 
sively than  is  reasonably  required  to  protect  the  purchaser  in 
the  use  and  enjoyment  of  the  business  purchased,  and  are  not 
otherwise  injurious  to  the  public  interest.  This  is  the  doctrine 
declared  and  applied  in  the  Court  of  Chancery,  and  recognized 
in  this  court  by  our  affirmance  of  its  decrees.  Richardson  v. 
Peacock,  26  N.  J.  Eq.  40;  Id.,  28  N.  J.  Eq.  151;  Id.,  33  N.  J. 
Eq.  597;  Mandeville  v.  Harman,  42  N.  J.  Eq.  185;  Finger  v. 
Hahn,  42  N.  J.  Eq.  606;  Id.,  44  N.  J.  Eq.  604;  Sternberg  v. 
O'Brien,  48  N.  J.  Eq.  670. 

It  is  observable  that  of  late,  and  elsewhere,  it  has  been  ques- 
tioned whether  the  rule  as  thus  stated  is  not  too  broad  to  be 
applicable  to  present  conditions.  In  1711  trade  was  subject  to 
limitations  which  have  largely  diminished  or  ceased  to  exist. 
When  orders  and  responses  had  to  be  transmitted  by  mail  or 
messenger,  and  the  mail  and  travelers  were  carried  by  coaches 
drawn  by  horses,  and  goods  were  transported  by  pack  or  wagon, 
the  area  of  the  trade  of  a  manufacturer  or  tradesman  was 
necessarily  limited  by  those  conditions.  Now  that  orders  and 
responses  may  be  transmitted  for  long  distances  by  telephone, 
and  over  the  world  by  telegraph,  and  goods  and  travelers  may 
have  quick  transit  over  land  and  sea,  the  area  of  such  trade 
may  be  immensely  greater.  Thereupon  it  is  contended  with 
great  force  that  the  true  test  of  the  validity  of  such  contracts 
in  restraint  of  trade  is  to  be  found  alone  in  their  being  reason- 
ably essential  to  the  protection  of  the  purchaser,  and  that, 
considering  the  vast  extent  of  the  area  of  some  trades,  there 
are  cases  in  which  a  general  restraint  cannot  be  held  to  be 
unreasonable.  Match  Co.  v.  Roeber,  106  N.  Y.  473;  Nordenfelt 
V.  Ammunition  Co.  [1894]  App.  Cas.  535;  Rousillon  v.  Rousil- 
lon,  14  Ch.  Div.  351;  Cloth  Co.  v.  Lorsont,  L.  R.  9  Eq.  345; 


THE  COMMON  LAW  167 

Machine  Co.  v.  Morse,  103  Mass.  73 ;  Gibbs  v.  Gas  Co.,  130  U.  S. 
396;  Underwood  v.  Barker  [1899]  1  Ch.  300. 

The  question  thus  suggested  does  not  arise  in  this  case,  unless 
the  contracts  before  us  are  found  to  be  contracts  in  general 
restraint  of  trade.  This  leads  us  to  inquire  whether  they  are 
general,  or  only  partial,  in  their  restraint,  and,  if  the  latter, 
whether  they  extend  beyond  what  is  reasonable  for  a  fair  pro- 
tection of  the  business  and  good  wdll  which  appellant  purchased 
from  respondents. 

The  contention  on  the  part  of  respondents  is  that  the  con- 
tracts in  question  restrain  them  from  engaging  in  the  business 
of  manufacturing  pottery  ware  in  an  area  comprising  the  whole 
United  States,  and  that  the  exception  of  one  state  and  one  terri- 
tory was  illusory  and  colorable,  because  they  claim  the  proofs 
show  that  such  manufacture  cannot  be  carried  on  in  those 
localities  with  profit.  It  is  insisted  that  a  restraint  extending 
over  the  whole  nation  is  a  general,  and  not  a  partial,  restraint. 

It  was  well  said  by  Judge  Andrews  in  his  opinion  in  Match 
Co.  V.  Roeber,  uhi  supra,  that  "the  boundaries  of  the  states  are 
not  those  of  trade  or  commerce."  It  may  also  be  said  that  in 
these  days  the  business  of  many  a  concern  extends,  not  only 
beyond  the  boundaries  of  the  state  in  which  it  has  a  local 
habitation,  but  even  beyond  the  limits  of  the  nation.  Yet  the 
public  policy  of  that  state  may  be  involved  in  favor  of  or  against 
the  restraint  of  such  trade,  however  widely  extended.  It  is 
possible  to  conceive  of  a  business  so  •uadely  extended  that  a 
restraint  of  it  within  the  limit  of  one  country  might  be  in  fact 
but  a  partial  restraint. 

In  the  case  last  cited  an  exception  of  one  state  and  territory 
similar  to  that  contained  in  the  contracts  in  question  was  pro- 
nounced not  colorable,  but  the  case  does  not  indicate  that  the 
exception  was  shown  by  tlie  proofs  to  be  of  territory  in  which 
the  restrained  manufacture  could  not  be  carried  on  with  prac- 
tical results.  In  this  case  the  proofs  establish  that  to  be  the 
fact  as  to  the  area  included  in  exception.  It  is  contended  for 
appellant,  however,  that  the  fact  so  established  is  immaterial, 
because  the  rule  against  general  restraint  of  trade  is  an  arbi- 
trary one,  and  an  exception  from  the  restraint,  however 
unsubstantial  or  illusory,  will  make  the  restraint  partial.  It  is 
not  easy  to  perceive  how  a  rule  of  this  character,  founded  on 


168    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

considerations  of  public  policy,  and  applied  in  the  public  in- 
terest, can  be  rightly  deemed  arbitrary  in  the  sense  intended  in 
this  contention.  Nor  is  it  obvious  that  the  courts  would  permit 
the  evasion  of  the  rule  by  illusive  contrivances. 

But  the  question  presented  need  not  be  decided,  unless  the 
contracts,  properly  construed,  extend  the  restraint  of  respond- 
ents over  the  whole  area  of  the  United  States,  except  the 
excepted  parts.  If  by  the  true  construction  the  contracts  are 
divisible,  and  bind  respondents  to  a  restraint  in  one  or  another 
of  separately  described  areas,  and,  as  applied  to  one  or  more 
of  such  areas,  the  restraint  is  not  unreasonable,  the  suggested 
question  need  not  be  solved. 

The  area  or  areas  within  which  the  restraint  upon  respond- 
ents is  engaged  for  in  these  contracts  is  described  as  being  not, 
as  stated  in  the  opinion  below,  within  any  state  "of"  the  United 
States  of  America,  but  "within  any  state  m  the  United  States 
of  America." 

In  seeking  the  meaning  of  this  description,  we  are  to  be 
guided  by  the  ordinary  rules  of  construction.  We  may  pre- 
sume that  the  contracting  parties  intended  to  make  a  valid 
contract  in  this  case,  under  the  doctrine  enunciated  in  Brewer 
V.  Marshall,  that  they  designed  to  contract  for  a  restraint  which 
would  be  partial,  and  not  general,  and  reasonable,  in  their 
judgment,  for  the  protection  of  the  purchaser  in  the  enjoyment 
of  the  subject  of  the  purchase.  The  contracts  are  to  be  con- 
strued so  as  to  give  them  validity,  if  such  construction  does  no 
violence  to  their  language;  and  the  subject-matter  of  the  con- 
tracts is  to  be  considered,  and  their  terms  are  to  be  construed, 
in  reference  thereto.  Here  the  transaction  was  the  sale  and 
purchase  of  an  established  business  with  its  good  will,  and  the 
contracts  in  question  were  plainly  intended  to  furnish  protec- 
tion to  the  purchaser  in  the  enjoyment  of  the  things  purchased. 
Respondents  received  a  large  sum  of  money  for  what  they  sold 
appellant,  which  they  yet  retain,  and  it  is  clear  that  the  con- 
sideration thus  received  and  retained  must  have  been  enhanced 
in  amount  by  the  obligation  of  the  contracts  now  in  question, 
and  that  so  much  could  not  have  been  obtained  by  respondents 
if  no  obligation  to  restrict  competition  had  been  made. 

Examining  thus  the  description  of  the  area  within  which  the 
restraint  agreed  to  by  respondents  is  to  operate,  I  have  reached 


THE  COMMON  LAW  169 

the  conclusion  that,  without  doing  any  violence  to  the  language, 
or  straining  its  import,  it  may  be  and  ought  to  be  held  to  be  a 
divisible  description,  embracing,  not  one  whole  area,  but  several 
areas  disjunctively  described.  The  exception  of  the  territory 
of  Arizona  is  urged  as  inconsistent  with  this  construction.  But 
the  express  inclusion  of  the  District  of  Columbia  equally  mili- 
tates against  the  contrary  construction,  for,  if  the  description 
covers  the  whole  area  of  the  United  States  of  America,  the 
District  of  Columbia  was  already  included.  Looking  at  the 
subject  of  the  contracts,  their  presumed  intent,  and  the  purpose 
of  any  agreement  to  restrain  respondents  from  engaging  in  a 

I  competitive  business,  the  description  can  be  read  as  applicable 
disjunctively  to  different  areas— as  within  the  State  of  Maine, 

,  within  the  State  of  New  Hampshire,  or  within  the  State  of  New 
Jersey,  etc.,  or  within  the  District  of  Columbia,  excepting,  etc., 
and  such  should  be  its  construction. 

Thus  read,  the  contracts  in  question  are  applicable  to  all  the 
described  areas,  and  are  enforceable  in  those  of  them  within 
which  the  restraint  contracted  for  is  reasonably  required  for 
the  protection  of  appellant  in  the  use  and  enjoyment  of  the 
business  and  good  will  acquired  from  respondents. 

An  instructive  case  on  this  point  has  lately  been  decided  in 
England-  The  question  arose  upon  a  covenant  by  an  employee 
with  his  employer  that  within  twelve  months  after  leaving  his 
employment  he  would  not  engage  in  a  similar  business  "in  the 
United  Kingdom  or  in  France,  or  in  the  Kingdom  of  Belgium 
or  Holland,  or  in  the  Dominion  of  Canada."  The  employee 
voluntarily  left  the  service  of  his  employer,  and  entered  into 
the  employment  of  a  merchant  in  the  same  trade  in  England. 
Upon  a  bill  by  the  first  employer,  Kekewich,  J.,  allowed  an 
injunction  against  the  breach  of  the  covenant.  Upon  appeal 
the  cause  was  heard  in  the  Chancery  Division,  before  Lindley, 
M.  R.,  and  Rigby  and  Vaughan  Williams,  L.  JJ.  The  master 
of  the  rolls  and  Rigby,  L.  J.,  held  that  the  covenant  was  a  sep- 
arable one,  and  was  not  unreasonable,  as  to  the  restraint  im- 
posed on  the  covenantor  within  the  United  Kingdom,  and  they 
sustained  the  injunction.  Vaughan  Williams  dissented,  but 
upon  the  ground  that  the  restraint  within  the  whole  of  the 
United  Kingdom  was  unreasonable.  Underwood  v.  Barker, 
ubi  supra. 


170    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

It  is  next  to  be  considered  whether  the  contracts  in  question, 
thus  construed,  were  reasonably  required  for  the  protection  of 
appellant,  and  to  what  extent,  if  any,  they  should  be  enforced, 
under  the  proofs  in  the  cause. 

It  appears  by  the  proofs  that  the  business  which  appellant 
purchased  of  respondents  had  been  carried  on  by  them  within 
an  area,  roughly  speaking,  covering  the  states  east  of  the  Mis- 
sissippi river,  and  north  of  a  line  drawn  through  Richmond  and 
Louisville,  including  the  District  of  Columbia. 

Appellant  contends  that  such  contracts  were  reasonably  re- 
quired to  protect  it,  not  cmly  in  the  areas  in  which  the  business  it 
purchased  of  respondents  had  been  carried  on,  but  also  in  other 
states  to  which  it  might  extend  that  business.  But  this  conten- 
tion I  deem  to  be  inadmissible.  The  validity  in  this  respect  of 
such  contracts  is  to  be  tested  by  the  effect  upon  the  business  and 
good  will  sold  and  purchased.  What  is  reasonably  required  to 
protect  that  may  be  upheld.  But  the  vendor  can  no  more 
contract  to  restrict  his  use  of  his  trade  or  calling  beyond  such 
protection  than  he  could  do  if  he  had  made  no  sale  at  all.  Such 
a  contract  would  be  opposed  to  public  policy. 

But  while  it  results  from  this  view  that  the  contracts  in 
question,  so  far  as  they  restrain  respondents  from  engaging  in 
the  same  business  in  localities  in  which  the  business  purchased 
by  appellant  of  them  had  never  been  carried  on,  may  be  op- 
posed to  public  policy,  it  does  not  follow  that  they  are  wholly 
unenforceable.  Contracts  including  distinct  and  separable  ob- 
ligations, some  of  which  are  legal,  and  some  prohibited,  are 
enforceable  as  to  such  obligations  as  are  legal.  Union  Locomo- 
tive &  Exp.  Co.  V.  Erie  Ry.  Co.,  35  N.  J.  Law,  240;  Stewart  v. 
Railroad  Co.,  38  N,  J.  Law,  505.  These  contracts,  as  to  areas 
described  therein  in  which  the  acquired  business  had  been  car- 
ried on,  may  be  enforced  upon  proper  proofs. 

Upon  the  proofs,  how  far  may  these  contracts  be  enforced? 
The  prayer  of  the  bill  is  for  an  injunction  in  the  terms  of  the 
contracts.  But  this  would  be  too  broad  a  restraint  on  respond- 
ents, because  it  would  include  localities  in  which  the  purchased 
business  had  never  been  carried  on,  and  where  no  protection  of 
it  was  required.  Upon  the  proofs,  I  conclude  that  no  restriction 
can  be  imposed  upon  respondents  as  to  any  area  beyond  the 
State  of  New  Jersey.    In  this  state  all  the  respondents,  except 


THE  COMjMON  law  171 

Richard  C.  and  Henry  D.  Olyphant,  are  actively  engaged  in 
the  very  business  they  contracted  not  to  engage  in.  There  is 
some  proof  of  sales  and  solicitation  of  trade  in  other  prohibited 
areas,  but  it  lacks  the  requisite  certainty  to  justify  a  broader 
injunction. 

It  remains  to  consider  other  objections  to  the  reasonableness  1|  /O 
of  these  contracts.  Jt  is  contended,  that  they  are  unreasonable 
because  they  restrain  respondents  from  the  manufacture  of  any 
pottery  ware,  while  the  business  sold  is  claimed  to  have  been 
that  of  manufacturing  sanitary  pottery  ware.  But  the  plant 
respondents  sold  was  adapted  to  the  manufacture  of  other  kinds 
of  ware,  and  they  had  in  fact  manufactured  other  ware.  The 
business  purchased  was  not  the  mere  manufacture  of  sanitary 
pottery  ware,  and  the  contracts  were  not  too  broad,  in  furnish- 
ing appellant  protection  in  respect  to  the  manufacture  of  all 
pottery  ware. 

It  is  further  objected  that  the  contracts  in  question  extend 
the  restraint  upon  respondents  over  too  great  a  period  of  time. 
The  ages  of  respondents,  it  is  said,  show  that  at  the  expiration 
of  the  limit  of  50  years  probably  some  of  them  will  have  died, 
and  all  of  those  surviving  will  have  passed  the  age  of  business 
activity.  The  contracts  are  not  unlimited  in  time,  but  the 
insistment  is  that  they  are  unreasonable  because  of  the  long 
limit  of  restraint.  But  whether  they  are  reasonable  is  not  to 
be  determined  by  their  disadvantageous  effect  upon  respond- 
ents, but  by  considering  whether  the  restraint  to  which,  for 
what  they  received  as  a  sufficient  consideration,  they  bound 
themselves,  was  reasonably  required  to  protect  the  purchaser  in 
the  enjoyment  of  his  purchase.  As  they  were  dealing  with  a 
corporation  which  had  acquired  a  corporate  life  of  50  years  for 
the  purpose  of  carrying  on  this  business,  the  limit  of  time  fixed 
by  the  contracts  is  not  unreasonable.  The  fact  that  the  limit 
exceeds  the  corporate  life  of  appellant  by  a  few  days  does  not, 
in  my  judgment,  require  a  different  conclusion. 

It  remains  to  consider  whether  the  contracts  in  question  are 
otherwise  against  the  public  policy  of  our  state.  The  learned 
vice  chancellor  held  them  to  be  opposed  to  the  public  interest, 
because  he  conceived  that  they  tended  to  create  a  monopoly  in 
the  business  of  manufacturing  sanitary  pottery  ware.  This 
effect  he  deemed  established  by  the  proofs  that  appellant,  simul- 


172    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

taneously  with  its  purchase  from  respondents,  also  purchased 
four  other  plants  used  in  the  manufacture  of  such  ware  in 
Trenton,  and  the  property,  business,  and  good  will  of  their 
owners,  and  took  from  each  of  those  vendors  contracts  restrain- 
ing them  from  engaging  in  the  business  of  manufacturing  pot- 
tery ware,  substantially  identical  with  the  contracts  taken  by  it 
from  respondents.  The  contracts  procured  from  respondents 
he  deemed  to  be  part  of  a  scheme  to  control  the  production, 
distribution,  and  sale  of  sanitary  pottery  ware,  and  to  exclude 
competition  therein.  Such  ware  he  declared,  on  the  authority 
of  the  promoters  of  appellant,  to  be  a  necessity  of  life. 

The  scheme  held  to  be  reprehensible  was  found  in  the  situa- 
tion disclosed  in  the  proofs.  Respondents,  as  owners  of  the 
business  sold  to  appellant,  had,  several  years  before  the  sale, 
united  with  the  owners  of  seven  other  potteries  in  Trenton, 
which  made,  among  other  things,  sanitary  pottery  ware,  in  an 
association  called  the  American  Sanitary  Potters'  Association. 
That  association  had  in  some  way  controlled  the  prices  at  which 
such  ware  produced  by  its  eight  members  (counting  the  owners 
of  each  pottery  as  one  member)  should  be  put  upon  the  market. 
The  action  of  the  association  in  that  regard  was  determined  by 
a  majority  of  its  eight  members.  By  its  purchases  appellant 
acquired  the  interest  of  five  of  the  members,  and  seems  to  have 
been  permitted  to  cast  a  vote  for  each  in  controlling  the  action 
of  the  association.  After  appellant's  purchases,  prices  were  so 
controlled  for  some  time,  and  until  the  association  fell  to  pieces. 

Contracts  by  independent  and  unconnected  manufacturers  or 
traders  looking  to  the  control  of  the  prices  of  their  commodities, 
either  by  limitation  of  production,  or  by  restriction  on  distribu- 
tion, or  by  express  agreement  to  maintain  specified  prices,  are, 
without  doubt,  opposed  to  public  policy.  The  contract  of  the 
Sanitary  Potters'  Association  in  this  regard  was  inimical  to 
public  interest  when  respondents  were  members  of  it,  and  none 
the  less  so  when  appellants  acquired  the  property  of  five  of  its 
members.  However  solemnly  the  members  of  that  association 
may  have  obligated  themselves  to  obey  the  behests  of  the  ma- 
jority in  respect  of  the  control  of  prices  of  their  ware,  no  court 
would  have  enforced  their  agreements,  or  awarded  damages  for 
any  breach  of  them. 

But  the  contracts  by  which  appellant  acquired  the  property 


THE  COMMON  LAW  173 

and  business  of  respondents  and  of  four  other  members  of  the 
association  contained  no  term  stipulating  for  the  continuance 
of  the  association,  or  for  the  enforcement  of  any  objectionable 
agreements  it  had  entered  into.  At  the  most,  so  far  as  appears, 
the  contemporaneous  purchases  by  appellant  gave  it  an  oppor- 
tunity to  use  the  majority  vote  in  the  association  for  such  control 
of  prices  as  its  agreements  provided  for.  Although  the  con- 
trol of  the  voting  majority  of  the  association  may  have  been  one 
of  appellant's  motives  for  making  its  simultaneous  purchases, 
it  is  inconceivable  that  any  one  of  the  five  vendors  could  have 
repudiated  his  contract  to  sell  to  appellant  on  the  ground  that 
such  sale,  if  consummated,  would  enable  appellant  to  obtain 
such  control.  The  public  interest  would  be  amply  protected  by 
invalidating  the  agreement  of  the  association  for  the  control  of 
prices,  and  tlie  disconnected  agreement  of  sale  would  be  enforced 
as  other  contracts. 

It  is  further  urged  that  the  simultaneous  contracts  procured 
by  appellant  create  or  tend  to  create  a  monopoly,  because  they 
stipulate  for  the  removal  of  many  competitors  in  the  business 
of  manufacturing  sanitary  pottery  ware.  The  owners  of  five  " 
of  the  eight  potteries  in  Trenton  manufacturing  that  kind  of 
ware  (and  there  were  but  few,  if  more  than  one,  elsewhere)  ^ 
thereby  agreed  not  to  engage  in  that  business  for  a  long  period  " 
of  time,  and  over  a  great  extent  of  country.  The  engagement 
of  respondents  in  that  respect  has  been  found  not  to  be  an  im- 
proper restraint  of  trade,  nor  inimical  to  public  policy  on  that 
ground,  but  a  contract  partially  enforceable  upon  respondents, 
if  not  otherwise  objectionable.  The  engagements  of  the  other 
vendors  who  sold  their  properties  and  business  to  appellant  are 
similar  in  terms  to  that  entered  into  by  respondents,  and  furnish 
a  reasonable  protection  to  appellant  of  the  business  and  good  ''1 
will  purchased  by  it  of  each  of  them.  Each  sale  and  each 
incidental  contract  against  competition  are,  for  reasons  before 
given,  unobjectionable.  Are  they  rendered  objectionable  by 
the  fact  that,  being  simultaneously  made,  they  excluded  from 
engaging  in  the  business  of  manufacturing  sanitary  pottery 
ware  so  large  a  proportion  of  those  previously  engaged  in  that 
manufacture  ? 

It  is  to  be  observed  that  the  contracts  of  respondents  and  the 
other  vendors  to  appellant  restricted  them  from  engaging  in  the 


174    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

business  of  manufacturing,  not  sanitary  pottery  ware  alone,  but 
all  pottery  ware.  The  proofs  show  that  a  large  number  of  per- 
sons are  engaged  in  manufacturing  pottery  ware  in  various 
parts  of  the  country,  and  that  the  contracts  in  question  would 
exclude  from  competition  a  very  small  proportion  of  them.  But 
as  the  proofs  also  show  that  the  main  purpose  of  appellant  was 
to  engage  in  the  manufacture  of  sanitary  pottery  ware,  I  have 
stated  the  proposition  in  a  more  restricted  form. 

Whether  sanitary  pottery  ware  has  become  a  necessity  of 
life  is  open  to  question.  It  is  certain  that  many  persons  manage 
to  exist  without  using  it.  But  if  its  use  is  of  importance  to 
health  and  comfort,  and  a  considerable  and  increasing  number 
of  persons  desire  to  acquire  and  use  it,  the  public  may  have  such 
an  interest  in  its  manufacture  and  sale  that  public  policy  will 
justify  judicial  interference  and  refusal  to  enforce  illegal  com- 
binations to  enhance  its  price.  The  elimination  of  competition 
may  produce  that  result.  The  contracts  in  question  were  not 
intended  to  withdraw,  and  do  not  appear  to  have  withdrawn, 
from  work,  a  single  workman  in  that  industry.  They  restrain 
a  comparatively  small  number  of  capitalists,  who  had  previously 
employed  their  capital  in  such  manufacture,  from  continuing  so 
to  do.  The  entire  capital  of  the  country,  except  theirs,  is  free 
to  be  employed  in  the  manufacture.  There  seems  no  ground  for 
the  claim  that  we  should  refuse  to  enforce  respondents'  contracts 
by  injunction,  when  the  proofs  furnish  no  reason  for  the  belief 
that  the  public  will  suffer  if  they  are  held  to  their  bargains. 

The  contemporaneous  contracts  were  all  made  as  incidental 
to  the  sale  and  purchase  of  competing  concerns  engaged  in  the 
manufacture  of  sanitary  pottery  ware.  They  were,  as  we  have 
seen,  reasonably  appropriate  to  the  protectioii  of  the  purchaser 
in  each  case.  While  contracts  to  restrain  or  limit  competition 
in  the  production  of  that  ware  may  be  repugnant  to  the  public 
interest,  such  a  restraint  or  limit  may  result  from  contracts 
which  the  courts  are  bound  to  enforce.  A  person  engaged  in 
any  manufacture  or  trade,  having  the  right  to  acquire  and 
possess  property,  and  to  do  with  it  what  he  chooses,  may  law- 
fully buy  the  business  of  any  of  his  competitors.  His  first  pur- 
chase would  at  once  diminish  competition.  If  he  continued  to 
purchase,  each  succeeding  transaction  would  remove  another 
competitor.     If  his  capital  was  large  enough  to  enable  him  to 


THE  COMMON  LAW  175 

buy  the  business  of  all  competitors,  the  last  purchase  would  com- 
pletely exclude  competition,  at  least  for  a  time.  But  in  the 
absence  of  legislative  restrictions,  if  such  could  be  imposed, 
upon  the  acquisition  of  such  property,  and  its  use  when  so 
acquired,  courts  could  impose  no  limitation.  They  would  be 
obliged  to  enforce  such  contracts,  notwithstanding  the  effect 
was  to  diminish,  or  even  to  exclude,  competition. 

But  appellant  is  a  corporation,  and  not  an  individual.     Cor-  ,;  ou««»J^    ^ 
porations,  however,  may  lawfully  do  any  acts  within  the  cor-  i 

porate  powers  conferred  on  them  by  legislative  grant.     Under    ^  » 

our  liberal  corporation  laws,  corporate  authority  may  be  ac- 
quired by  aggregation  of  individuals,  organized  as  prescribed, 
to  engage  in  and  carry  on  almost  every  conceivable  manufacture 
or  trade.  Such  corporations  are  empowered  to  purchase,  hold, 
and  use  property  appropriate  to  their  business.  They  may  also 
purchase  and  hold  the  stock  of  other  corporations.  Under  such 
powers  it  is  obvious  that  a  corporation  may  purchase  the  plant 
and  business  of  competing  individuals  and  concerns.  The  legis- 
lature might  have  withheld  such  powers,  or  imposed  limitations 
upon  their  use.  In  the  absence  of  prohibition  or  limitation  on 
their  powers  in  this  respect,  it  is  impossible  for  the  courts  to 
pronounce  acts  done  under  legislative  grant  to  be  inimical  to 
public  policy.  The  grant  of  the  legislature  authorizing  and  per- 
mitting such  acts  must  fix  for  the  courts  the  character  and  limit 
of  public  policy  in  that  regard.  It  follows  that  a  corporation 
empowered  to  carry  on  a  particular  business  may  lawfully 
purchase  the  plant  and  business  of  competitors,  although  such 
purchases  may  diminish,  or  for  a  time,  at  least,  destroy,  compe- 
tition. Contracts  for  such  purchases  cannot  be  refused  enforce- 
ment. 

Since  contracts  by  individuals,  and  by  corporations  having 
legislative  authority,  for  the  purchase  of  competing  plants  and 
business,  may  be  made,  and  are  enforceable,  although,  as  a  re- 
sult thereof,  competition  is  diminished  or  temporarily  destroyed, 
it  further  follows  that  contracts  reasonably  required  to  make 
such  purchases  effective  by  protecting  the  purchaser  in  the  use 
and  enjoyment  of  the  thing  purchased  cannot  be  declared  by 
the  courts  to  be  repugnant  to  public  policy.  The  interference 
with  competition  resulting  from  such  purchases  under  legislative 
permission  being  found  not  to  invalidate  contracts  for  such  pur- 


176    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

chases,  the  like  interference  by  contracts  reasonably  required 
for  the  protection  of  the  purchaser  cannot  be  held  to  invalidate 
them. 

The  result  is  that  the  decree  appealed  from  must  be  affirmed 
as  to  Richard  C.  and  Henry  D.  Olyphant,  but  as  to  the  other 
respondents  it  must  be  reversed,  and  a  decree  be  made  enjoining 
them,  according  to  the  prayer  of  the  bill,  within  the  state  of 
New  Jersey .22 

For  reversal  (in  part) — The  Chief  Justice,  Van  Syckel, 
Dixon,  Garrison,  Gummers,  Ludlov^,  B'ogert,  Nixon,  Adams, 
Vredenburgh — 10. 

For  affirmance — Lippincott,  Hendrickson — 2. 


^ .  ^     TUSCALOOSA  ICE  MFG.  CO.  v.  WILLIAMS 


e^- 


^     lJ-*^       (Supreme  Court  of  Alabama,   1899.     127  Ala.   110.; 

'»  .i*'  McCLELLAN,  C.  J.23  B.  H.  Williams  is  plaintiff,  and  the 
^^  ^  Tuscaloosa  Ice  Manufacturing  Company  is  defendant,  in  this 
•  «^  action.     The  complaint  is  as  follows:     "The  plaintiff  claims  of 

^  ^  the  defendant  the  sum  of  three  hundred  and  twenty-five  dollars, 

[  ,y*^  with  interest  from  the  1st  day  of  September,  1898,  as  damages 
•"^  .  for  the  breach  of  a  contract  or  agreement  entered  into  between 
**  \.    the  plaintiff  and  defendant  on,  to  wit,  the  1st  day  of  January, 

^  J  ^^      1898,  in  substance  as  follows :     This  agreement,  made  and  en- 
Ul's  tered  into  between  the  Tuscaloosa  Ice  Mfg.  Co.,  of  which  Henry 
"""'^'^  >r^I^-  Gray  is  president,  of  the  first  part,  and  B.  H.  Williams,  sole 
grfr'V^^  owner  of  an  ice  machine  located  near  the  Alabama  Great  South- 
Ajf^^"^   em  Railroad  depot,  at  Tuscaloosa,  Ala.,   of  the  second  part, 
witnesseth  that  the  party  of  the  first  part,  for  and  in  considera- 
tion of  the  covenants  of  the  party  of  the  second  part  herein- 
after mentioned,  agrees  to  pay  the  party  of  the  second  part  the 
sum  of  eight  hundred  and  seventy-five  dollars  ($875.00),  in  five 
equal  payments,  of  one  hundred  and  seventy-five  dollars  each 

22 — See  also  Davis  v.  Booth  &  Co.,  23 — Only  the  opinion  of  the  court 

131  Fed.  31,  37;   Camors-McConnell       is  given. 
Co.    V.    McConnell,    140    Fed.    412; 
Chappel    V.    Brockw^ay,    21    Wend. 
(N.  Y.)   157. 


THE  COMMON  LAW  177 

($175.00),  the  first  payment  to  be  made  this  clay,  and  the  other 
four  payments  on  the  1st  day  of  June,  1898,  1899,  1900,  1901, 
respectively.  In  consideration  of  the  promise  of  the  foregoing 
payments,  the  party  of  the  second  part  hereby  agrees  not  to  run 
his  ice  machine  as  described  above,  nor  suffer  it  to  be  run,  for 
the  term  of  five  years,  at  Tuscaloosa,  Ala.,  unless  the  party  of 
the  second  part  shall  make  a  sale  of  the  same  to  be  run  at 
Tuscaloosa,  Ala.,  in  which  event  he  releases  the  party  of  the  first 
part  from  making  all  subsequent  payments  to  him,  and  also 
agrees  to  refund  on  any  payment  made  by  [to J  him  during  the 
year  such  sale  is  made  such  a  part  of  said  payment  as  the  re- 
mainder of  that  year  bears  to  the  entire  year.  It  is  further 
agreed  that,  if  the  said  party  of  the  second  part  shall  sell  his  ice 
plant  between  January  1st  and  June  1st  of  any  year,  he  shall 
be  entitled  to  his  proportional  payment  for  that  year.  It  is 
further  agreed  that  in  case  some  unknown  party  should  erect 
or  operate  an  ice  machine  in  the  city  of  Tuscaloosa,  Ala.,  or  in 
the  vicinity  of  said  city  of  Tuscaloosa,  that  the  party  of  the 
second  part,  known  in  contract  as  B.  H.  Williams,  shall  release 
all  subsequent  payments  to  the  party  of  the  first  part  at  the 
time  of  the  erection  of  an  ice  plant  to  compete  with  said  first 
party,  provided  that  the  sum  of  $500  shall  have  been  paid  to 
the  party  of  the  second  part.  It  is  further  agreed  that,  if  said 
plant  or  opposition  should  disturb  the  party  of  the  first  part 
before  the  amount  of  five  hundred  dollars  is  paid  to  the  party 
of  the  second  part,  that  the  party  of  the  first  part  shall  only  pay 
to  the  party  of  the  second  part  the  difference  between  the  total 
payments  made  and  the  $500.00,  and,  should  said  ice  plant  be 
erected  after  $500.00  had  been  paid  to  the  party  of  the  second 
part,  no  other  payments  will  be  required.  And  plaintiff  says 
that  although  he  has  complied  with  all  its  provisions  on  his  part, 
and  has  not  sold  his  said  ice  machine  to  be  operated  at  or  in  the 
vicinity  of  Tuscaloosa,  the  defendant  has  failed  to  comply  with 
its  provisions  on  its  part  in  the  particulars  following,  viz. : 
Some  time  during  the  summer  of  1898,  to  wit,  in  July  or  August, 
the  Tuscaloosa  Gas,  Electric  Light  &  Power  Co.,  a  corporation 
having  its  office  and  principal  place  of  business  at  Tuscaloosa, 
Ala.,  amended  its  corporate  charter,  changing  its  name  to  the 
'Tuscaloosa  Light  &  Ice  Company,'  and  having  conferred  upon 
it  the  power  to  manufacture  and  sell  ice  at  Tuscaloosa,  Ala.,  and 

Kales  R.  of  T.  Vol.  1—12 


178    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

erected  an  ice  plant  and  began  the  manufacture  of  ice  at  Tusca- 
loosa; and  although  the  defendant  had,  at  the  time  of  the 
establishment  of  said  Tuscaloosa  Light  &  lee  Co. 's  ice  plant  at 
Tuscaloosa,  only  paid  to  plaintiff  the  first  payment  of  $175.00 
mentioned  in  said  contract  as  paid  on  the  day  of  its  execution, 
it  has  wholly  failed  and  refused  to  pay  plaintiff  the  difference 
between  said  payment  of  $175  and  $500.00,  as  it  agreed  in  said 
contract  to  do  in  the  event  of  the  erection  of  an  opposition  ice 
plant;  hence  this  suit." 

To  this  complaint  the  defendant  interposed  the  following  plea : 
"At  the  time  said  contract  was  entered  into  the  plaintiff  owned 
and  operated  the  only  ice  factory  in  Tuscaloosa  or  its  vicinity, 
and  the  only  factory  which  was  then  selling  ice  to  the  people  of 
Tuscaloosa  and  immediately  surrounding  territory,  other  than 
defendant's  factory.  Said  population,  consisting  of,  to  wit, 
seven  thousand  people,  was  drawing  its  whole  supply  from,  and 
was  dependent  upon  said  two  ice  factories  for  the  same,  and  the 
demand  for  ice  in  said  community  was  sufficient  to  consume  and 
render  marketable  the  output  of  both  of  said  factories.  Prior 
to  said  contract  the  price  of  this  article  of  necessity  and  com- 
fort was  lessened  to  said  community  of  consumers  by  competi- 
tion between  these  two  said  ice  factories.  The  object  and  effect 
of  said  contract  was  to  wholly  discontinue  the  manufacture  of 
ice  by  plaintiff,  to  close  down  plaintiff's  factory,  to  end  all  com- 
petition with  defendant's  ice  trade,  to  leave  defendant's  plant 
the  sole  source  of  ice  supply  for  said  community,  and  to  give  to 
defendant  the  complete  control  and  monopoly  of  said  ice  market, 
enabling  it  to  increase  the  price  thereof  regardless  of  the  cost 
of  its  manufacture;  wherefore  said  contract  was  one  cornering 
said  ice  market,  stifling  competition,  creating  monopoly,  closing 
down  heretofore  active  manufacture,  and  hence  the  same  is  void 
as  in  restraint  of  trade  and  against  public  policy."  The  trial 
court  sustained  a  demurrer  to  the  plea,  defendant  declined  to 
plead  over,  and  judgment  was  entered  for  plaintiff.  The  pres- 
ent appeal  from  that  judgment  presents  the  question  of  whether 
the  contract  sued  on,  considered  in  connection  with  the  facts 
averred  in  the  plea,  involves  a  vicious  restraint  of  trade,  and  is 
therefore  violative  of  the  public  policy  of  the  state  and  void. 

The  argument  in  support  of  the  contract  is  largely  based  upon 
the  considerations  that  the  restraint  it  imposes  is  limited  both, 


THE  COMMON  LAW  179 

as  to  time  and  to  territory, — to  five  years  at  the  most,  and  to 
the  town  of  Tuscaloosa  and  its  vicinity, — and  many  cases  have 
been  determined  upon  these  considerations  alone.  But  they 
were  so  determined,  or  at  least  at  the  present  day  they  could  be 
so  determined,  only  because  the  contracts  involved  in  them  were 
unobjectionable  upon  other  grounds.  As  the  principles  obtain- 
ing here  are  understood  in  their  application  to  existing  condi- 
tions of  traffic  and  commerce,  we  apprehend  that  circumstances 
in  respect  of  a  particular  business  might  exist  under  which  a 
covenant  against  engaging  in  it  covering  all  time  and  the  whole 
country  would  be  upheld  by  the  courts.  All  such  covenants  are 
for  the  protection  of  the  business  of  the  covenantee,  and  the 
logical  rule  would  seem  to  be  that  their  scope  may  be  as  broad 
as  to  time  and  territory  as  the  business  intended  to  be  protected. 
It  is  upon  this  principle  that  contracts  not  to  engage  at  any 
time  in  particular  businesses  in  the  United  Kingdom,  or  in  the 
United  States,  or  even  in  Great  Britain  and  Holland,  or  in  the 
United  States  and  Canada,  have  been  held  valid;  the  business  in 
each  instance  being  co-extensive  with  the  territory  embraced  in 
the  covenant,  and  of  probable  indefinite  continuance.  And,  on 
the  other  hand,  the  same  principle  is  potent  to  the  conclusion 
that  such  covenant,  having  reference  to  a  particular  county  or 
even  town  only,  and  confined  to  a  year  or  other  definite  time, 
may  be  void,  in  whole  or  in  part,  for  being  broader  as  to  time 
or  place  than  the  business  designed  to  be  protected  by  it;  as 
where  the  business  extends  only  to  a  part  of  the  county  or 
town,  or  must  cease  short  of  the  time  of  the  covenant.  But 
however  extended  or  circumscribed  the  business  may  be,  how- 
ever broad  or  narrow  may  be  the  covenant  in  respect  of  time 
and  place,  and  however  exactly  the  covenant  may  respond  in 
time  and  place  to  the  exigencies  of  the  business,  the  contract 
may  yet  fall  under  the  ban  of  public  policy,  and  call  for  con- 
demnation by  the  courts  upon  other  and  distinct  considerations, 
growing  out,  it  would  seem,  of  the  nature  of  the  transaction 
upon  which  it  is  based,  or  looking  to  the  protection  of  the  public 
from  the  strangulation  of  legitimate  and  necessary  competition. 
One  of  these  considerations — that  resting  on  the  nature  of  the 
transaction  in  which  the  covenant  not  to  engage  in  a  particular 
business  is  made — is  this :  Leaving  to  one  side  and  out  of  view 
those  cases  in  which  property  is  sold,  and  as  part  of  the  con- 


180    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

sideration  the  vendee  agrees  not  to  employ  it  in  a  business  being 
carried  on  by  the  vendor,  or  within  the  territory  covered  by  the 
vendor's  business,  and  that  other  class  of  cases  in  which  an 
employee  covenants  with  his  employer  not  to  engage  in  the  busi- 
ness about  which  he  is  employed  on  his  own  account  or  for  an- 
other after  the  termination  of  his  employment,  and  that  yet 
other  class  of  cases  involving  secret  or  patented  processes,  or 
patented  devices  and  instrumentalities,  it  seems  that  the  only 
cases,  apart,  as  we  have  indicated,  from  those  just  mentioned,  in 
which  there  can  be  any  legitimate  occasion  for  a  covenant  on 
the  part  of  one  not  to  engage  in  the  business  proposed  to  be 
carried  on  by  another,  are  those  in  which  the  covenantor  has 
sold  to  the  covenantee  his  stock  in  trade,  as  in  the  case  of  a 
merchant,  or  his  part  of  it,  as  where  one  mercantile  partner 
sells  out  to  the  other  or  to  a  stranger,  or  being  a  professional 
man  with  an  established  practice,  as  a  physician,  dentist,  and 
the  like,  or  mechanic  with  a  shop  and  accustomed  patronage,  as 
a  blacksmith  and  the  like,  or,  if  he  be  a  manufacturer,  sells  out 
his  practice  or  business  or  plant,  with  or  without  an  express 
stipulation  as  to  its  good  will,  and  in  the  same  transaction,  and 
as  part  of  the  thing  sold,  and  as  in  part  the  consideration  for 
the  price  paid,  agrees  not  to  engage  in  that  business,  profession, 
or  trade,  as  the  case  may  be,  within  the  territory  covered  or 
supplied  by  the  business,  practice,  or  factory  purchased,  during 
the  time  the  vendee  shall  be  interested  therein.  In  line  with 
this  view,  it  is  said  by  Mr.  Beach:  "The  modem  doctrine  is 
well-nigh  universal  that,  when  one  engaged  in  any  business  or 
occupation  sells  out  his  stock  in  trade  and  good  will  or  his  pro- 
fessional practice,  he  may  contract  with  the  purchaser  and  bind 
himself  not  to  engage  in  the  same  vocation  in  the  same  locality 
for  a  time  named,  and  he  may  be  enjoined  from  violating  this 
contract.  This  is  about  as  far  as  contracts  in  restraint  of  trade 
have  been  upheld  by  the  American  courts  or  those  of  England. 
While  the  law,  to  a  certain  extent,  tolerates  contracts  in  restraint 
of  trade  or  business  when  made  between  vendor  and  purchaser, 
and  will  uphold  them,  it  does  not  treat  them  with  any  special 
indulgence.  They  are  intended  to  secure  the  purchaser  of  the 
good  will  of  a  trade  or  business  a  guaranty  against  the  competi- 
tion of  the  former  proprietor.  When  this  object  is  accomplished, 
it  will  not  be  presumed  that  more  was  intended."     2  Beach, 


THE  COMMON  LAW  181 

Cont.  §  1575.  And  to  the  same  effect  is  the  declaration  of  the 
Supreme  Court  of  Illinois  in  More  v.  Bennett,  140  111.  69,  80, 
15  L.  R.  A.  364 :  * '  Contracts  in  partial  restraint  of  trade  which 
the  law  sustains  are  those  which  are  entered  into  by  a  vendor 
of  a  business  and  its  good  will  with  his  vendee,  by  which  the 
vendor  agrees  not  to  engage  in  the  same  business  within  a  limited 
territory,  and  the  restraint,  to  be  valid,  must  be  no  more  exten- 
sive than  is  reasonably  necessary  for  the  protection  of  the  vendee 
in  the  enjoyment  of  the  business  purchased;"  and  this  language 
is  quoted  approvingly  by  the  Supreme  Court  of  Pennsylvania. 
Nester  v.  Brewing  Co.,  161  Pa.  St.  473,  481,  24  L.  R.  A.  250. 
The  Supreme  Court  of  Iowa  adopts  the  same  view  (Chapin 
v.  Brown  [Iowa]  48  N.  W.  1074,  12  L.  R.  A.  428)  ;  and  so  have 
other  courts,  where  this  phase  of  the  general  question  has  been 
discussed  (Oliver  v.  Gilmore  [C.  C]  52  Fed.  562).  There  are 
several  reasons  for  upholding  the  covenant  on  the  part  of  the 
vendor  in  all  such  cases  to  desist  from  the  business  in  competition 
with  the  purchaser  which  do  not  obtain  in  other  cases.  In  the 
first  place,  the  restraint  is  partial  in  the  sense  that  it  covers  only 
the  time  and  locality  during  and  in  which  the  vendee  carries  on 
the  business  purchased,  and  beyond  these  limitations  the  seller 
is  at  liberty  to  carry  on  the  same  business.  Then,  too,  the  vendor 
receives  an  equivalent  for  his  partial  abstention  from  that  busi- 
ness in  the  increased  price  paid  him  for  it  on  account  of  his 
covenant;  and  his  entering  into  and  observance  of  the  covenant 
not  only  does  not  tend  to  his  pauperization  to  the  detriment  of 
the  public,  but,  to  the  contrary,  by  securing  to  him  the  full  value 
of  his  business  and  its  good  will, — a  value  which  he  has  an  abso- 
lute right  to  secure  in  this  way, — the  covenant  operates  to  his 
affirmative  pecuniary  benefit  and  against  his  impoverishment, 
involving,  the  theory  is,  imminency  of  his  becoming  a  public 
charge  or  a  criminal,  in  that,  while  being  paid  for  desisting  from 
the  particular  business  in  the  locality  covered  by  it,  he  may  still 
enter  upon  other  pursuits  of  gain  in  the  same  locality  or  upon 
this  one  in  other  localities.  And,  finally,  while  such  covenants 
preclude  the  competition  of  the  covenantor,  it  is  neither  their 
purpose  nor  effect  to  stifle  competition  generally  in  the  locality, 
nor  to  prevent  it  at  all  in  a  way  or  to  an  extent  injurious  to  the 
public;  for  the  businessjn_the  hands  of  the  purchaser  is  carried 
on  just  as  it  was  in  the  hands  of  the  vendor ;  the  former  merely 


182    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

takes  the  place  of  the  latter ;  the  commcxlities  of  the  trade  are  as 
open  to  the  public  as  they  were  before ;  the  same  competition 
exists  as  existed  before ;  there  is  tlie  same  employment  furnished 
to  others  after  as  before ;  the  profits  of  the  business  go,  as  they 
did  before,  to  swell  the  sum  of  public  wealth ;  the  public  has  the 
same  opportunities  of  purchasing,  if  it  be  a  trading  business ; 
they  are  served  in  the  same  way,  if  it  be  a  profession ;  and  pro- 
duction is  not  lessened,  if  it  be  a  manufacturing  plant.  As  said 
by  Putnam,  C.  J.,  in  Oliver  v.  Gilmore  (C.  C.)  52  Fed.  568: 
".  .  .  When  the  covenantor  surrenders  his  trade  or  pro- 
fession, an  equivalent  is  given  to  the  public,  because,  ordinarily, 
as  a  part  of  the  transaction,  the  covenantee  assumes  and  carries 
on  the  trade  or  profession,  nothing  is  abandoned,  and  only  a 
transfer  is  accomplished.  The  same  occupation  continues.  The 
same  number  of  mouths  are  fed."  And  these  considerations 
obtain  where  one  already  engaged  in  a  business  iu  good  faith, 
for  the  purpose  of  enlarging  and  increasing  his  business,  pur- 
chases the  stock  in  trade  or  practice  or  plant  of  a  rival,  and 
incident  thereto  takes  the  covenant  of  the  seller  not  to  engage 
in  the  same  business  within  the  territory  covered  by  the  con- 
solidated enterprise,  and  in  all  such  cases  the  covenant  in  re- 
straint of  trade  is  a  reasonable  one  and  valid.  But  there  is  no 
room  for  the  application  of  these  reasons  to  cases  in  which  the 
covenantee  does  not  purchase  the  business,  practice,  trade,  or 
plant  of  the  covenantor,  and  the  transaction  involves  nothing 
but  a  bald  covenant  in  restraint  of  trade,  for  which  there  is  no 
other  consideration  than  the  payment  of  money  for  the  obliga- 
tion itself.  In  such  case  the  business  of  the  covenantor  is  not 
transferred  merely;  it  is  destroyed.  His  plant  is  not  continued 
by  the  covenantee  in  useful  production,  but  is  left  to  rust  and 
canker  in  disuse.  The  public  loses  a  wealth-producing  instni- 
mentality.  Labor  is  thrown  out  of  employment.  "The  same 
number  of  mouths"  are  not  fed.  The  consideration  the  cove- 
nantor receives  is  not  the  just  reward  for  his  skill  and  energy 
and  enterprise  in  building  up  a  business,  but  is  a  mere  bribery 
and  seduction  of  his  industry,  and  a  pensioning  of  idleness. 
The  motives  actuating  such  a  transaction  are  always,  in  a  sense, 
sinister  and  baleful.  Its  purpose  and  effect  are  not  to  protect 
the  covenantee  in  the  legitimate  use  of  something  he  has  acquired 
from  the  covenantor,  but  to  secure  to  him  the  illegitimate  use. 


THE  COaOION  LAW  183 

or  the  use  in  an  illegitimate  way,  of  that  which  he  already  has, 
in  respect  of  which  there  is  no  reason  or  occasion  for  the  cove- 
nantor to  assume  any  obligation  of  protection.  Such  an  under- 
taking in  restraint  of  trade,  however  limited  as  to  time  and 
place,  would  seem,  upon  all  general  principles,  though  we  know 
of  no  case  expressly  and  directly  so  deciding,  to  be  necessarily 
unreasonable  and  vicious  on  the  consideration  alone  that  it  is 
not  entered  into  nor  has  it  the  effect  of  protecting  some  busi- 
ness, practice,  trade,  or  interest  which  the  covenantor  has  sold 
to  the  covenantee.  The  undertaking  involved  in  this  case  is 
precisely  of  that  class,  and  must  fail  upon  the  principle  we  have 
been  discussing. 

But  this  contract  is  clearly  ])ad  upon  the  other  consideration 
adverted  to  above :  It  tends  to  injure  the  public  by  stifling  com- 
petition and  creating  a  monopoly.  Its  manifest  purpose,  even 
upon  its  face,  and  certainly  when  taken  in  connection  with  the 
facts  averred  in  the  plea,  was  to  secure  to  the  covenantee  a 
monopoly  in  the  production  and  sale  of  ice  in  the  town  of 
Tuscaloosa  and  vicinity,  and  such  is  its  operation  and  effect. 
Indeed,  on  the  allegations  of  the  plea,  it  was  even  worse  than 
this ;  for  one  of  its  results  was  to  reduce  the  available  supply  of 
ice  below  the  needs  of  the  locality  affected  by  it.  It  thus  oper- 
ated not  only  to  put  it  in  the  power  of  the  covenantee  to  arbi- 
trarily fix  prices,  but  directly  and  necessarily  to  create  a  partial 
ice  famine,  upon  which  the  defendant  company  could  batten  and 
fatten  at  its  own  sweet  will.  But,  aside  from  this,  the  monopoly 
itself — the  putting  in  the  power  of  the  covenantee  to  control  the 
production,  and  to  fix  its  own  prices  whatever  the  production — 
is  quite  sufficient  for  the  utter  condemnation  of  the  contract  as 
being  against  public  policy.  The  purpose  to  create  a  monopoly 
is  obvious.  It  is  well-nigh  expressed  in  the  writing  itself.  That 
a  monopoly  was  created  is  clear  beyond  all  dispute.  That  ends 
the  case  against  the  validity  of  the  covenant.  Nothing  more  need 
loe  said.  All  that  has  been  said  for  the  appellee  against  that 
conclusion  i^  vain  and  useless.  Given  the  purpose  and  effect  of  s^  .  % 
this  contract,  its  condemnation  would  foUow  even  had  the  plain-/i*/^  , 
tiff,  as  a  part  of  the  transaction,  sold  his  ice  plant  to  the  de- 
fendgmt;  and  the  limitation  of  the  covenant  as  to  time  and 
place,  though  reasonable  in  itself,  is  of  no  redeeming  importance 
or  efficacy  whatever.     So  of  the  suggestion  that  no  monopoly 


184    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

was  created  because  the  contract  itself  evidences  a  contempla- 
tion that  "unknown  parties"  might  come  to  Tuscaloosa,  establish 
an  ice  factory,  and  enter  upon  the  production  and  sale  of  ice  in 
competition  with  the  covenantee.  There  was  no  other  such  plant 
there  at  the  time  the  contract  was  entered  into  (it  would  not  have 
been  entered  into  at  all  had  there  been),  and  it  is  of  no  sort  of 
consequence  that  another  might  be  established,  or  even  that 
another  was  in  fact  established,  soon  after  its  execution, — as  soon, 
probably,  as  one  could  be  established  after  defendant's  monopoly 
began  to  grind.  Nor  is  there  the  least  merit  in  the  suggestion  that 
ice  could  be  brought  to  Tuscaloosa  from  other  places,  and  hence 
that  defendant  had  no  monopoly.  Even  with  ordinary  commodi- 
ties, a  covenant  tending  to  create  a  monopoly  in  a  given  city  or  to 
unduly  control  prices  is  not  relieved  by  the  consideration  that  its 
baneful  effects  may  be  counteracted  in  greater  or  less  degree  by 
importations ;  and  the  position  is  exceedingly  nude  and  bald  when 
taken  in  respect  of  a  commodity  like  ice  or  water,  the  chief  cost 
of  which,  apart  from  the  plant  for  its  manufacture  or  collection, 
is  in  the  transportation  to  the  consumer,  and  it  may  be  safely  said 
that  an  ice  factory  in  a  town  beyond  the  ordinary  reach  of  deliv- 
ery wagons  from  another  town  has  a  monopoly  of  the  ice  business 
in  that  town.  And  so  of  the  argument  that  public  policy  has 
to  do  in  this  connection  only  with  the  necessaries  of  life,  and  that 
ice  is  not  a  commodity  of  that  class.  Both  the  propositions  thus 
asserted — the  one  of  law,  the  other  of  fact — are  unsound.  To 
say  the  least,  it  is  against  public  policy  to  monopolize  in  this 
way  any  commodity  of  common  utility,  or  of  common  consump- 
tion or  use  among  the  people,  or  even  of  considerable  utility  or 
consumption,  whether  it  be  one  of  the  necessaries  of  life  or  not ; 
and,  in  the  second  place,  we  feel  entirely  assured  of  conservatism 
in  declaring  that  in  this  latitude,  and  especially  in  towns  as 
populous  as  Tuscaloosa,  ice  is  one  of  the  common  necessaries  of 
life.  All  of  the  foregoing  propositions,  sustaining  the  conclusion 
that  the  contract  sued  on  is  violative  of  public  policy  as  stifling 
competition  and  promoting  monopoly  to  the  manifest  injury  of 
the  public,  are  fully  supported  by  the  following  authorities: 
2  Beach,  Cont.  §§  3579-1592;  Clark,  Cont.  p.  458  et  seq.;  Craft 
V.  McConoughy,  79  lU.  346 ;  Amot  v.  Cool  Co.,  68  N.  Y.  558 ; 
More  v.  Bennett,  140  111.  69,  15  L.  R.  A.  361 ;  Lumber  Co.  v. 
Hayes,  76  Cal.  387 ;  Hooker  v.  Vandewater,  4  Denio  349 ;  Stan- 


i  u^- 


THE  COMMON  LAW  185 

ton  V.  Allen,  5  Denio  434 ;  Salt  Co.  v.  Guthrie,  35  Ohio  St.  666 ; 
Association  v.  Kock,  14  La.  Ann.  168 ;  Oil  Co.  v.  Adoue,  83  Tex. 
650,  15  L.  R.  A.  598 ;  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co., 
68  Pa.  St.  173;  Chaplin  v.  Brown  (Iowa)  48  N.  W.  1074,  12 
L.  R.  A.  428;  Oliver  v.  Gilmore  (C.  C),  52  Fed.  562;  Nester  v. 
Brewing  Co.,  161  Pa.  St.  473,  24  L.  R.  A.  247;  Anderson  v. 
Jett,  89  Ky.  376,  6  L.  R.  A,  390. 

It  follows  that,  in  our  opinion,  the  court  below  erred  in  sus- 
taining the  demurrer  to  defendant's  plea.  The  judgment  of 
the  law  and  equity  court  will  be  reversed,  and  a  judgment  will 
be  here  entered  overruling  said  demurrer.  The  cause  will  be 
remanded. 

Reversed,  rendered  in  part,  and  remanded. 

^^^^ 

CLEMONS  V.  MEADOWS     '^  ^  t.-*^  *^      /, , 

(Court  of  Appeals  of  Kentucky,  1906.     123  Ky.  178;  ,.^^ 

98  S.  W.  13.)  fi^J^  *""%         t* 

PAYNTER,  J.     This  action  was  instituted  upon  a  writing  '^    L->*^ 
which  reads  as  follows :    ' '  This  agreement  entered  into  this  12th   '       ,Jj^ 
day  of  July,  1904,  by  and  between  W.  W.  Meadows,  of  the  New  ^♦^'^ 
Meadows  Hotel,  and  Clemons  &  Wade  Bros.,  of  the  Usona  Hotel,  li^  (r****"^ 
both  of  Fulton,  Ky.,  witnesseth:     That  for  a  period  of  three 
years  from  date  hereof  W.  W.  Meadows,  who  agrees  to  close  and 
keep  closed  his  hotel,  known  as  the  'New  Meadows  Hotel,'  re- 
serving to  himself  the  right  to  rent  the  same  for  offices  of  all 
kind  and  description,  and  also  to  all  roomers  for  one  week  or 
more,  when  opportunity  may  occur.    That  for  and  in  considera- 
tion of  the  aforesaid  elimination  of  the  New  Meadows  Hotel  as 
a  factor  in  the  hotel  situation  for  the  time  named,  of  Fulton, 
Ky.,  Clemons  &  Wade  Bros,  agree  to  pay  in  advance  to  W.  W. 
Meadows  one  hundred  dollars  cash,  and  one  hundred  dollars 
additional  on  the  12th  day  of  each  succeeding  month  for  three 
years  from  this  date.     It  is  agreed  by  both  parties  that,  should 
any  rush  of  patronage  greater  than  the  Usona  Hotel  can  accom- 
modate oecur,  W.  W.  Meadows  agrees  to  entertain,  for  lodging 
only,  any  and  all  guests  sent  to  him  by  Clemons  &  Wade  Bros., 
and  to  receive  therefor  as  compensation   50  per  cent  of  any 


186    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

revenue  derived  therefrom.  It  is  further  agreed  that  the  price 
for  said  lodging  shall  never  be  less  than  $1  per  person.  How- 
ever, it  is  agreed  and  understood  that  absence  from  home  or 
any  other  good  reason  shall  be  sufficient  and  good  reason  for 
W.  W.  Meadows  declining  to  take  such  guest.  All  rooms  occu- 
pied by  guests  at  the  New  Meadows  Hotel  to  be  cared  for  by 
W.  W.  Meadows." 

The  appellants  claim  that  the  contract  is  not  enforceable,  and 
that  they  cannot  be  required  to  pay  the  sums  of  money  therein 
stipulated  to  be  paid,  because  the  contract  is  against  public 
policy  and  without  consideration.  It  is  averred  in  the  answer 
that  at  the  time  of  the  execution  of  the  contract  Fulton  was  a 
town  of  5,000  inhabitants;  that  it  was  situated  at  the  crossing 
of  the  Illinois  Central  Railroad,  running  from  Chicago  to  New 
Orleans  and  from  Louisville  to  Memphis  and  New  Orleans;  that 
it  was  the  headquarters  of  the  Kentucky  &  Tennessee  Division 
of  the  road,  and  a  large  number  of  local  and  transient  persons 
stopped  at  the  hotels  for  meals  and  lodging;  that  the  New 
Meadows  and  Usona  Hotels  were  first-class  hotels,  and  were  the 
only  hotels  of  that  class  in  the  town;  that  they  were  rivals  and 
competitors;  that  there  was  no  consideration  for  the  execution 
of  the  contract,  except  that  which  is  stipulated  therein ;  that  it 
was  entered  into  between  the  parties  for  the  purpose  of  remov- 
ing competition  that  existed  in  the  hotel  business  in  Fulton,  and 
for  the  pui'pose  of  giving  the  Usona  Hotel  a  monopoly  of  the 
hotel  business  of  its  class ;  and  that  the  contract  is  against  public 
policy.  The  court  sustained  a  demurrer  to  the  answer,  and,  the 
appellants  failing  to  plead  further,  judgment  was  rendered 
against  them. 

So  far  as  we  are  aware,  the  exact  question  presented  by  this 
record  has  never  been  decided  by  this  court.  This  court  has 
upheld  contracts  which  were  in  partial  restraint  of  trade.  Pyke 
V.  Thomas,  4  Bibb  486,  7  Am.  Dec.  741 ;  Grundy  v.  Edwards,  7 
J.  J.  Marsh,  368,  23  Am.  Dec.  409 ;  Sutton  v.  Head,  86  Ky.  156, 
9  Am.  St.  Rep.  274 ;  Warehouse  Co.  v.  Hobson,  16  Ky.  Law  Rep. 
869.  It  was  said  in  Sutton  v.  Head,  86  Ky.  156,  9  Am.  St.  Rep. 
274:  "Indeed,  a  particular  trade  may  be  permitted  by  being 
limited  for  a  short  period  to  a  few  persons,  and  the  public 
benefited  by  preventing  too  many  from  engaging  in  the  same 
calling  at  the  same  place.    If,  therefore,  the  limitation  be  a  rea- 


THE  COMMON  LAW  187 

sonable  one,  it  will  be  upheld."  Beach  on  Contracts,  §1575,. 
announces  the  rule  as  follows:  "The  modem  doctrine  is  well- 
nigh  universal  that  when  one  engaged  in  any  occupation  sells 
out  his  stock  in  trade  and  good  will,  or  his  professional  practice, 
he  may  contract  with  the  purchaser  and  bind  himself  not  to  en- 
gage in  the  same  vocation  in  the  same  locality  for  a  time  named, 
and  he  may  be  enjoined  from  violating  this  contract.  This  is 
about  as  far  as  contracts  in  restraint  of  trade  have  been  upheld 
by  the  American  courts,  or  those  of  England.  While  the  law, 
to  a  certain  extent,  tolerates  contracts  in  restraint  of  trade  or 
business,  when  made  between  vendor  and  purchaser  and  will 
uphold  them,  it  does  not  treat  them  with  any  special  indulgence. ' ' 
The  eases  in  which  this  and  other  courts  have  recognized  this 
rule  as  correct,  are  where  parties  sell  their  business  or  trade, 
together  with  good  will.  For  instance,  cases  where  a  merchant 
sells  to  his  partner,  or  to  a  stranger,  or  where  one  being  a  pro- 
fessional man,  with  an  established  business  as  a  physician  or 
dentist,  sells  it,  and  as  part  of  the  consideration  the  vendor 
agrees  not  to  engage  in  the  business  for  a  time,  in  that  locality, 
and  in  such  cases  the  courts  have  sustained  such  a  contract, 
although  they  be  in  partial  restraint  of  trade.  Such  contracts 
are  intended  to  secure  to  the  purchaser  the  good  will  of  the 
trade  or  business,  and  as  a  guaranty  the  vendor  agrees  not  to 
engage  in  like  business  or  trade  at  that  place  for  a  specified 
time.  In  these  cases  the  restraint  to  be  valid  must  be  more  ex- 
tensive than  is  reasonably  necessary  for  the  protection  of  the 
vendee,  in  the  enjoyment  of  the  business  which  he  has  purchased. 
In  this  class  of  cases  the  court  recognizes  that  the  vendor  has 
received  an  equivalent  for  his  agreement  to  partially  abstain 
from  business  at  the  place  where  his  business  was  formerly  con- 
ducted. In  such  cases  the  agreement  does  not  contemplate  that 
the  business  or  trade  purchased  shall  be  discontinued  and  thus 
perhaps  thrown  out  of  employment  those  whose  services  were 
necessary  to  carry  on  the  business,  but  on  the  contrary,  it  is 
contemplated  that  the  business  will  be  carried  on  and  that  the 
public  will  continue  to  receive  benefits  which  may  accrue  from 
the  conduct  of  the  business.  It  results  that  the  agreement  does 
not  have  the  effect  of  depriving  the  public  of  any  benefits  which 
it  has  enjoyed  from  the  conduct  of  the  business,  or  pursuit  of 
the  trade  which  has  been  transferred  to  another.     Such  con- 


188    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

tracts  do  not  have  the  effect  of  destroying  the  competition  which 
existed  by  reason  of  which  the  public  enjoyed  benefits.  From 
the  terms  of  the  contract  and  the  averments  of  the  answer  it  is 
perfectly  manifest  that  the  purpose  of  entering  into  the  contract 
was  to  eliminate  the  New  Meadows  Hotel  from  the  hotel  busi- 
ness in  Fulton,  and  prevent  competition  between  it  and  the 
Usona  Hotel  conducted  by  the  appellants,  and  to  give  to  the 
latter  a  monopoly  of  the  hotel  business  of  the  class  to  which 
these  hotels  belong.  They  were  the  only  first-class  hotels  in 
town,  and  tlie  effect  of  the  contract  was  to  enable  the  Usona 
Hotel  to  serve  all  the  patrons  whose  tastes  and  financial  condi- 
tion induce  them  to  stop  at  first-class  hotels. 

The  question  for  our  solution  is:  Is  the  contract  against 
public  policy  and  without  consideration  ?  Hotels  are  established 
and  maintained  for  the  purpose  of  serving  the  public.  The 
opening  of  a  hotel  is  an  invitation  to  the  public  to  become  its 
guests.  Hotels  are  not  conducted  for  the  social  enjoyment  of 
the  owners,  but  for  the  convenience  of  the  public,  that  is,  those 
whose  business  or  pleasure  may  render  it  necessary  that  they 
shall  ask  and  receive  food  and  shelter  at  a  place  of  public  enter- 
tainment for  compensation.  A  hotel  is  a  quasi  public  institu- 
tion. Those  who  desire  to  conduct  a  hotel  must  first  obtain  a 
license  from  the  commonwealth  allowing  them  to  do  so.  Laws 
have  been  enacted  for  the  purpose  of  protecting  the  proprietors 
of  hotels  because  of  the  public  character  of  the  business.  It  is 
the  duty  of  hotel  proprietors  to  receive  guests  of  good  character, 
well  demeaned  and  who  are  free  from  any  contagious  or  in- 
fectious disease,  and  who  have  the  financial  ability  to  pay  the 
charges.  When  a  hotel  agrees  not  to  perform  a  duty  imposed 
upon  them  by  law,  and  agrees  not  to  serve  the  public  with  a 
view  of  giving  a  competitor  in  business  a  monopoly  of  the  hotel 
business,  its  act  is  in  contravention  of  a  sound  public  policy. 
The  contract  relied  upon  in  this  ease  is  plainly  in  restraint  of 
trade,  the  only  consideration  being  the  payment  of  money  for 
such  an  agreement.  No  property  is  sold  or  good  will  transferred. 
The  business  is  destroyed,  not  continued  for  the  benefit  of  the 
public.  The  laborers  that  were  necessary  to  run  tlie  hotel  are 
thrown  out  of  employment,  and  the  public  is  deprived  of  the 
benefits  which  would  accrue  should  the  competition  continue. 
The  contract  was  not  for  the  purpose  of  protecting  the  appel- 


THE  COMMON  LAW  189 

lants  in  the  legitimate  use  of  something,  which  they  acquired  by 
it,  for,  nothing  was  conveyed  to  them.  The  purpose  and  effect 
of  the  contract  was  to  enable  the  appellants  to  enjoy  an  illegiti- 
mate use  of  something  which  they  already  had.  Our  conclusion 
is  that  the  contract  is  against  public  policy  and  the  demurrer 
to  the  answer  should  have  been  overruled.  Chapin  v.  Brown 
(Iowa),  12  L.  R.  A.  428,  32  Am.  St.  Rep.  297;  Clark  v.  Need- 
ham  (Mich.),  51  L.  R.  A.  785,  84  Am.  St.  Rep.  539;  Tuscaloosa 
Ice  Mfg.  Co.  V.  Wniiams  (Ala.),  28  South.  669,  50  L.  R.  A.  175, 
85  Am.  St.  Rep.  125 ;  Anderson  v.  Jett,  89  Ky.  375,  6  h.  R.  A. 
390.  In  Anderson  v.  Jett,  89  Ky.  375,  6  L.  R.  A.  390,  this  Court 
well  said:  "Rivalry  is  the  life  of  trade.  The  thrift  and  wel- 
fare of  the  people  depend  upon  it.  Monopoly  is  opposed  to  it  all 
along  the  line.  The  accumulation  of  wealth  out  of  the  brow 
sweat  of  honest  toilers,  by  means  of  combinations,  is  opposed  to 
competing  trade  and  enterprise.  That  public  policy  that  en- 
courages fair  dealing,  honest  thrift  and  enterprise  among  all 
the  citizens  of  the  commonwealth,  and  is  opposed  to  monopolies 
and  combinations  because  unfair  to  fair  dealing,  thrift,  and 
enterprise,  declares  all  combinations  whose  object  is  to  destroy 
or  impede  free  competition  between  the  several  lines  of  business 
engaged  in,  utterly  void.  The  combination  or  agreement, 
whether  or  not  in  the  particular  instance  it  has  the  desired  effect, 
is  void.  The  vice  is  in  the  combination  or  agreement.  The  prac- 
tical evil  effect  of  the  combination  only  demonstrates  its  char- 
acter; but  if  its  object  is  to  prevent  or  impede  free  and  fair 
competition  in  trade,  and  may,  in  fact,  have  that  tendency,  it  is 
void  as  being  against  public  policy." 

The  judgment  is  reversed  for  proceedings  consistent  with  this 
opinion. 

Petition  for  rehearing  hy  appellee  overruled. 

V;^' 

WESTERN  WOODEN-WARE  ASSN.    (A  CORPORATION) 

V.  STARKEY 

(Supreme  Court  of  Michigan,  1890.     84  Mich.  76.) 

LONG,  J.  The  biU  in  this  cause  is  filed  for  the  purpose  of 
having  the  defendants  Starkey,  Ferris,  and  Olmsted  enjoined 


190    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

from  engaging  in  the  business  of  manufacturing  pails,  tubs,  and 
other  articles  of  wooden-ware  during  the  period  of  five  years, 
from  the  29th  day  of  June,  A.  D.  1888;  to  enjoin  the  other 
defendants  from  carrying  on  that  business  with  them ;  to  enjoin 
all  the  defendants  from  using  certain  premises  in  the  village  of 
St.  Louis,  Gratiot  county,  for  the  purpose  of  manufacturing 
tubs,  pails,  etc.  The  bill  asks  for  an  accounting  touching  com- 
plainant's damages,  for  a  decree  requiring  the  same  to  be  paid, 
and  there  is  also  a  prayer  for  general  relief. 

The  bill  shows  that  the  complainant  is  a  corporation  organ- 
ized under  the  laws  of  the  state  of  Illinois  for  the  purpose  of 
carrying  on  the  business  of  manufacturing,  buying,  and  selling 
wooden-ware,  and  the  materials  which  enter  into  wooden-ware ; 
that  it  was  engaged  in  the  business  prior  to  June  29,  1888 ;  that 
on  that  date  the  defendants  Starkey,  Ferris,  and  Olmsted  were 
doing  business  at  St.  Louis  as  partners  under  the  name  of  the 
St.  Louis  Wooden-Ware  Company;  that  they  were  engaged  in 
business  similar  to  that  of  complainant,  and  owned  and  occu- 
pied certain  premises,  with  a  manufacturing  establishment,  and 
were  possessed  of  a  large  quantity  of  manufactured  articles, 
materials,  tools,  and  other  chattels  used  in  their  business;  that 
on  that  date  the  complainant  and  the  members  of  said  copartner- 
ship entered  into  a  contract  which  is  attached  to  the  bill,  the 
material  parts  of  which  will  be  referred  to.  By  this  contract, 
the  firm,  in  consideration  of  $6,000,  agree  to  sell  to  the  com- 
plainant their  stock  on  hand,  materials,  tools,  implements,  and 
chattels.  The  contract  contains  this  clause : 
/      "And  the  said  first  parties  also  agree  not  to  become  engaged 

|v«^  in  the  manufacture  of  tubs  and  pails  during  the  next  five  years 

^^^^       in  the  states  of  Michigan,  Wisconsin,  Illinois,  Minnesota,  Iowa, 

k*^**'^  Missouri,  Indiana,  and  Ohio,  or  allow  their  property  at  St. 
Louis,  Mich.,  to  be  used  for  that  purpose,  nor  to  selL  said  prop- 
erty to  any  one  for  that  business,  except  by  consent  of  said 
second  parties;  and  in  case  any  of  the  parties  of  the  first  part 
violate  this  agreement,  they  do  hereby  agree  to  pay  to  said 
second  party  $2,000  for  damages,  for  violating  this  contract." 
The  contract  also  contains  certain  other  provisions  not  neces- 
sary here  to  be  noticed.  After  making  the  contract  the  com- 
plainant paid  the  copartnership  the  $6,000,  and  received  the 
chattels.    The  defendants  Starkey,  Ferris,  and  Olmsted  violated 


THE  COamON  LAW  191 

the  contract  in  that  they  are  now  engaged  in  the  manufacturing 
and  selling  wooden-ware  in  the  premises  in  question,  and,  as 
the  bill  alleges,  have  confederated  with  the  other  defendants 
Palmerton,  Fowler,  and  Newman  to  carry  on  the  business  with 
them,  and,  for  the  purpose  of  concealing  their  transactions,  pro- 
cured the  defendants  Palmerton,  Fowler,  and  Newman  to  or- 
ganize a  corporation  under  the  name  of  the  F.  G.  Palmerton 
Wooden-Ware  Company,  Limited,  with  intent  to  engage  in  said 
business. 

The  bill  further  charges  that  the  defendant  Starkey  pre- 
tended to  convey  the  lands  in  question  to  his  son-in-law  Palmer- 
ton; that  Palmerton  has  conveyed  them  to  the  Palmerton 
Wooden-Ware  Company,  and  that  the  business  of  manufacturing 
wooden-ware  has  been  carried  on  in  said  premises  by  the  Palmer- 
ton Wooden- Ware  Company ;  that  the  defendants  Starkey  and 
Ferris  have  active  supervision,  control,  and  management  of  said 
corporation,  and  have  been  making  sales  of  their  pails  and  tubs 
in  all  the  states  of  Michigan,  Wisconsin,  Illinois,  Iowa,  Missouri, 
Indiana,  and  Ohio.  The  bill  charges  that  the  corporation  so 
organized  by  the  defendants  is  a  mere  pretense  and  cover  pro- 
cured to  be  organized  by  the  defendants  Starkey  and  Ferris; 
that  Starkey  and  Ferris  furnish  the  capital  therefor;  that  the 
stock  of  the  corporation  is  held  for  their  benefit  and  advantage ; 
that  the  breach  of  the  contract  on  the  part  of  the  defendant  has 
gi*eatly  injured  and  damnified  the  complainant. 

To  this  bill  the  defendants  filed  a  general  demurrer,  which 
the  circuit  judge  sustained ;  and  on  the  14th  day  of  March,  1890, 
entered  a  decree  dismissing  the  bill.  From  this  decree  com- 
plainant appeals. 

Complainant's  counsel  raised  but  three  questions  in  this 
court: 

(1)  That  the  clause  of  the  contract  wherein  the  defendants 
Starkey,  Fen-is,  and  Olmsted  agree  not  to  become  or  engage  in 
the  manufacture  of  tubs,  etc.,  during  the  next  five  years,  in  any 
of  the  eight  states  named,  or  permit  the  premises  in  question  to 
be  used  for  that  purpose,  without  the  consent  of  the  complainant, 
is  valid; 

(2)  that  the  clause  of  the  contract  which  provides  "in  case 
any  of  the  parties  of  the  first  part  violate  this  agreement,  they 
do  hereby  agree  to  pay  to  said  second  party  $2,000  for  damages 


192    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

for  violating  this  contract,"  does  not  preclude  the  complainant 
seeking  relief  by  injunction; 

(3)  that  Act  No.  225  of  the  Public  Acts  of  1889,  declaring 
certain  contracts,  agreements,  undertakings,  and  combinations 
unlawful,  and  to  provide  punishment  for  those  who  shall  enter 
into  the  same,  or  do  any  act  in  the  furtherance  thereof,  has  no 
application  in  this  case. 

Counsel  for  complainant  contends,  under  his  first  proposi- 
tion, that  this  covenant  is  limited  in  respect  to  time;  that  it  is 
also  limited  in  regard  to  territory, — that  is,  to  Michigan  and  the 
seven  other  states  named ;  that  it  is  a  covenant  embodied  in  the 
contract,  of  which  contract  the  defendants  Starkey,  Ferris,  and 
Olmsted  sell  certain  property,  the  price  being  fixed  at  one  sum, 
both  for  the  value  of  the  property  and  for  the  covenant;  that 
how  much  of  this  price  is  applicable  to  the  property  sold, 
and  how  much  to  the  covenant  not  to  engage  in  business,  neither 
the  contract  nor  the  circumstances  enable  us  to  say ;  but  that  it 
would  be  presumed  tJiat,  by  reason  of  the  covenant,  a  larger 
price  was  paid  by  the  complainant  than  would  be  necessary 
merely  to  cover  the  value  of  the  property  sold.  Counsel  insists 
that  this  question  has  been  settled  decisively  by  this  court,  and, 
in  support  of  that  proposition,  counsel  cites  Hubbard  v.  Miller, 
27  Mich.  15;  Beal  v.  Chase,  31  Mich.  490.  Counsel  also  con- 
tends that  the  rule  laid  down  in  Beal  v.  Chase,  supra,  is  ap- 
proved in  Doty  v.  Martin,  32  Mich.  4B2 ;  Caswell  v.  Gibbs,  33 
Mich.  331 ;  Grow  v.  Seligman,  47  Mich.  610 ;  Watrous  v.  Allen, 
57  Mich.  366. 

From  the  view  we  take  of  this  case,  we  need  discuss  but  one 
question.  The  contract  must  be  declared  void  on  the  ground 
of  public  policy.  The  cases  cited  by  counsel  for  complainant  do 
not  sustain  the  doctrine  he  contends  for  here.  This  case  does 
not  fall  within  that  class  of  cases  where  contracts  have  been 
upheld  though  the  parties,  by  the  contract,  were  to  abstain  from 
carrying  on  the  same  business  for  a  particular  length  of  time, 
and  within  a  designated  territory.  In  Hubbard  v.  Miller,  supra, 
the  complainant  was  engaged  in  carrying  on  the  business  of  a 
general  retail  hardware  store,  in  the  city  of  Grand  Haven, 
including  the  tubing  and  all  necessary  apparatus  and  tools  for 
sinking  drive-wells,  and  was  also  carrying  on  the  business  of 
putting  down  drive-wells.     Two  of  the  defendants.  Miller  and 


THE  COMIVION  LAW  193 

Decker,  partners  under  the  firm  name  of  George  "W.  Miller  & 
Co.,  kept  a  like  hardware  store  in  the  same  city,  and  like  the 
complainant  kept  on  hand  the  tubing  and  other  materials  used 
in  putting  down  such  wells,  and  were  also  engaged  in  putting 
them  down  for  those  who  chose  to  employ  them.  Complainants 
purchased  the  stock,  tools,  etc.,  of  the  defendants  Miller  and 
Decker,  and  paid  their  price  on  condition  that  they  would  cease 
to  do  that  kind  of  business,  and  would  not  keep  well-drives, 
tools,  and  fixtures.  The  defendants  violated  this  contract.  The 
firm  of  George  W.  Miller  &  Co.,  was  dissolved,  and  afterwards 
reorganized,  with  the  defendant  Akeley  as  a  member  of  the  firm. 
The  new  firm  shortly  after  went  into  business,  and  kept  the 
same  kind  of  tools  and  materials  as  complainant,  and  carried  on 
the  well-driving  business.  Defendant  Decker  went  into  busi- 
ness for  himself,  and  also  carried  the  same  line  of  stock,  and 
commenced  putting  down  drive-wells.  It  is  true  that  this  court, 
on  the  heari-ng  here,  granted  a  perpetual  injunction.  But  Chief 
Justice  Christiancy,  who  wrote  the  opinion  in  the  case,  said: 

"Whether  such  contracts  can  be  supported  or  not,  depends 
upon  matters  outside  of  and  beyond  the  abstract  fact  of  the 
contract  or  the  pecuniary  consideration.  It  will  depend  upon  the 
situation  of  the  parties,  the  nature  of  their  business,  the  interests 
to  be  protected  by  the  restrictions,  its  effect  upon  the  public ;  in 
short,  all  the  surrounding  circumstances,  and  the  weight  or  effect 
to  be  given  to  these  circumstances,  is  not  to  be  affected  by  any 
presumption  for  or  against  the  validity  of  these  restrictions.  If 
reasonable  and  just,  the  restriction  will  be  sustained;  if  not,  it 
will  be  held  void." 

The  court  construed  this  contract  as  limited  to  the  city  of 
Grand  Haven  and  vicinity.  It  will  be  noticed  that  the  circum- 
stances surrounding  that  case  and  the  situation  of  the  parties' 
show  that  the  complainant  purchased  a  business  which  was  simi- 
lar to  the  one  which  he  was  then  carrying  on,  and  which  he  con- 
tinued to  carry  on  thereafter  in  the  same  place.  The  public  may 
have  been  as  well  served  by  this  means  as  though  the  two  or 
three  firms  continued  the  business. 

In  Beal  v.  Chase,  31  Mich.  490,  to  which  the  learned  counsel 
refers  as  sustaining  his  position,  it  appears  that  Chase  was  the 
publisher  of  a  receipt-book,  and  carried  on  the  business  of  print- 
ing.   Chase  sold  to  Beal  his  printing  establishment,  the  receipt- 

Kales  R.  of  T.  Vol.  I'— 13 


194    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

book  and  copyrights,  the  good-will  of  the  business,  and  the  right 
to  use  the  name  of  Dr.  Chase  in  connection  with  the  book  and 
business,  and  agreed  not  to  engage  in  the  business  of  printing 
and  publishing  in  the  state  of  Michigan,  so  long  as  Beal  remained 
in  the  printing  and  publishing  business  at  Ann  Arbor.  The 
whole  business  was  turned  over  to  Beal,  and  he  was  to  fulfill  all 
contracts  entered  into  by  Dr.  Chase,  and  was  to  furnish  the  paper, 
the  "Courier  and  Visitant,"  to  all  subscribers,  etc.  It  appears 
that  the  business  was  to  be  carried  on  as  Chase  had  carried  it 
on,  and  the  property  purchased  was  devoted  to  the  business  in 
which  it  had  theretofore  been  used.  It  was  not,  like  the  present 
case,  closed  up  and  taken  out  of  the  channels  of  business,  and 
the  court  upheld  and  enforced  the  contract  which  the  parties 
themselves  had  made. 

The  complainant  here  is  a  corporation  organized  and  existing 
under  the  laws  of  the  state  of  Illinois,  and  having  its  place  of 
business  in  Chicago.  It  is  alleged  in  the  bill  that  they  are 
engaged  in  the  business  of  manufacturing,  buying,  and  selling 
pails,  tubs,  and  other  articles  of  wooden-ware,  and  manufactur- 
ing, buying,  and  selling  staves,  heading,  hoops,  and  other  articles 
of  wooden-ware;  also  for  the  owning  and  operating  machinery, 
tools,  and  implements  connected  with  and  used  in  the  manu- 
facture of  pails,  tubs,  and  other  articles  of  wooden-ware ;  that  it 
sells  products  in  the  eight  great  states  named.  It  is  not  alleged 
by  the  bill  that,  in  the  making  of  the  contract  the  complainant 
intended  to  take  the  business  and  good-will  of  Starkey,  Ferris, 
and  Olmsted,  and  carry  on  the  business  of  manufacturing  these 
articles  in  this  state ;  but,  from  the  terms  of  the  contract,  it  is 
manifest  that  they  not  only  intended  to  take  these  parties  out  of 
the  manufacturing  business,  but  to  ship  the  machinery  which 
was  used  for  that  purpose  out  of  the  state,  and  close  the  doors 
of  the  shops.  Complainant  did  not  purchase  the  realty.  It 
purchased  all  the  machinery  there  in  use,  and  the  contract  shows 
that  it  was  to  be  taken  -down  and  placed  on  board  the  cars.  The 
interests  of  the  parties  alone  are  not  the  sole  considerations 
involved  here.  It  is  the  duty  of  the  court  to  see  that  the  public 
interests  are  not  in  any  manner  jeopardized.  The  state  has  the 
welfare  of  all  its  citizens  in  keeping,  and  the  public  interest  is 
the  pole-star  to  all  judicial  inquiries. 

Here  a  large  manufacturing  business  had  been  established, 


THE  COIVIMON  LAW  195 

and  presumably  it  gave  employment  to  quite  a  number  of  peo- 
ple. By  the  contract  these  people  are  thrown  out  of  employ- 
ment, and  deprived  of  a  livelihood,  and  no  other  of  the  citizens 
of  Michigan  are  called  in  to  take  their  places.  The  business_is_ 
no  longer  to  be  carried  on  berej^but  is  removed  out  of  the  state. 
The  parties  are  not  only  bound  by  the  contract,  if  valid,  not  to 
manufacture  here  for  a  period  of  five  years,  but  in  seven  other 
of  the  states  of  the  great  northwest  teeming  with  its  millions  of 
people.  If  the  complainant  could  enforce  this  contract  against 
Starkey,  Ferris,  and  Olmsted,  and  shut  the  doors  of  that  shop, 
and  prohibit  their  again  opening  them  for  five  years  in  any  one 
of  those  states,  they  could  as  well  make  valid  and  binding  con- 
tracts to  shut  the  shop  of  every  manufacturing  institution  in  the 
state,  and  in  the  other  seven  states,  and  compel  the  parties  now 
owning  and  operating  them  to  remain  out  of  business  for  a  term 
of  years,  and  hold  the  doors  of  these  shops  shut  during  such 
period;  for  the  contract  which  complainant  seeks  to  enforce 
provides  that  these  parties  shall  not  allow  their  property  to  be 
again  used  for  that  purpose  within  the  time  limited,  nor  sell  it 
to  any  one  for  that  business,  except  by  consent  of  the  complain- 
ant, and  this  under  a  penalty  of  $2,000. 

A  somewhat  similar  question  arose  in  Wright  v.  Ryder,  re- 
ported in  36  Cal.  342.  There  a  contract  had  been  entered  into 
for  the  purchase  by  the  Oregon  Steam  Navigation  Company  of 
the  California  Steam  Navigation  Company  of  a  steamboat  called 
the  "New  World,"  for  the  sum  of  $75,000,  and  also  an  agree- 
ment by  the  Oregon  Steam  Navigation  Company  that  the  steam- 
boat should  not  be  run  upon  any  of  the  routes  of  travel  on  the 
rivers,  bays,  or  waters  of  the  state  of  California,  for  the  period 
of  10  years  thereafter.  The  validity  of  this  contract  was  before 
the  court,  it  being  claimed  that  it  was  void  on  the  ground  of 
public  policy,  and  it  was  held  void,  the  court  there  saying : 

"If  the  California  Steam  Navigation  Company,  which  now 
occupies  our  bays,  rivers,  and  inlets  with  its  fleet  of  steamboats, 
should  suddenly  convey  them  all  to  a  purchaser  on  condition 
that  they  were  not  to  be  employed  in  navigating  any  of  the 
waters  of  this  state  for  a  period  of  10  years,  no  one  could  doubt 
that  this  would  operate  as  a  great  present  calamity  to  the  public, 
and  the  condition  would  be  void  as  a  restraint  upon  trade.  On 
the  other  hand,  if  a  sloop  or  schooner  of  50  tons  burden  should 


196    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

be  sold  on  a  similar  condition,  the  injury  to  the  public  would  be 
scarcely  appreciable.  In  like  manner,  if  all  the  carpenters  and 
masons  in  a  large  city  should  bind  themselves  not  to  prosecute 
their  business  in  this  state  for  a  period  of  10  years,  it  might 
produce  great  public  inconvenience ;  whereas,  if  only  one  car- 
penter or  mason  should  enter  into  a  similar  contract,  the  loss  of 
his  service  might  not  be  felt  by  the  public.  And  yet,  in  the 
latter  case,  we  should  be  bound  by  a  long  line  of  adjudications  in 
England  and  America  to  bold  the  contract  void  in  restraint  of 
trade.  ^' 

In  the  present  case,  the  defendants  Starkey,  Ferris,  and  Olm- 
sted were  not  only  to  remain  out  of  such  business  for  the  full 
time  specified,  but  the  premises  which  had  been  used  to  carry  on 
the  manufacturing  by  them,  though  not  sold  and  conveyed 
under  the  contract,  could  not  be  again  used  for  such  time  by 
them  or  any  other  party  for  the  same  business.  I  do  not  think 
\  it  needs  the  citation  of  authorities  to  show  that  contracts  of  this 
nature  have  frequently  been  condemned  by  the  courts,  and  held 
void  as  unreasonable  restraints  of  trade,  and  therefore  void  on 
the  ground  of  public  policy. 

The  decree  of  the  court  below  must  be  affirmed,  with  costs. 

The  other  justices  concurred.^^ 


f^ 


>^ .       WEST  VIRGINIA  TRANSPORTATION  CO.  v.  OHIO  RIVER 
^  ^'  '^  PIPE  CO. 

(Supreme  Court  of  Appeals,  West  Virginia,  1883. 
22  W.  Va.  600.) 

Bill  to  enjoin  certain  defendants  from  laying  and  construct- 
ing any  line  of  pipe  or  tubing  for  the  transportation  of  oil  upon 
and  from  a  tract  of  land  known  as  the  "Gale  tract,"  or  from 
interfering  in  any  manner  with  the  sole  and  exclusive  right 
thereon  acquired  by  the  complainant  by  the  deeds  hereafter 
mentioned  in  the  opinion  of  the  Court. 

"i-U   '  \,.,^      24 — In    Clark    v.    Needham,    125  privilege  of   renewing   the   contract 

i^N-v^  *  *■  Mich.  84,  a  contract  to  cease  manu-  for   four  years   more,   was   held   il- 

^        ,/    facturing    certain    articles    for    one  legal.  V"\  V 

^wi>*^      '     year,     the     promisee     having     the  ^    .         ,  yjoff^  ^      j. 

** 


<^ 


I  ^j^ 


THE  COMMON  LAW  197 

Defendants  demurred  and  filed  their  joint  and  several  answers. 

On  the  final  hearing  it  was  decreed  that  the  said  injunction 
awarded  the  plaintiff  be  dissolved  and  the  bill  of  the  plaintiff  be 
dismissed. 

From  this  decree  the  West  Virginia  Transportation  Company 
appealed. 

GREEN,  J.  The  real  question  involved  in  this  case  is :  Should 
the  courts  at  the  instance  of  the  West  Virginia  Transportation 
Company  enforce  the  grants  and  contracts  made  with  it  by 
E.  L.  Gale  and  wife  dated  respectively  January  31,  1870,  and 
October  23,  1873?  These  two  contracts  are  identical  in  lan- 
guage, except  that  the  first  applied  to  lands  in  Ritchie  county 
and  the  second  to  lands  in  Wood  county  adjoining.  The  first 
of  these  contracts  is  in  the  following  language : 

"We,  the  undersigned,  for  and  in  consideration  of  the  sura  of 
one  dollar,  receipt  of  which  is  hereby  acknowledged,  do  hereby 
grant  unto  the  West  Virginia  Transportation  Company,  a  com- 
pany incorporated  under  special  act  of  the  Legislature  of  West 
Virginia,  passed  February  26,  1867,  and  their  assigns,  the  ex- 
clusive right  of  way  and  privilege  to  construct  and  maintain  one 
or  more  lines  of  tubing  for  the  transportation  of  oil,  water  or 
other  liquids  along,  through  and  under  lands  owned'  by  the 
undersigned  in  Ritchie  county  in  the  State  of  West  Virginia; 
also  the  right  to  construct  and  maintain  a  telegraph  along  said 
tubing,  and  the  privilege  to  remove  said  tubing  and  telegraph  at 
pleasure. 

"Witness  our  hands  and  seals  this  31st  day  of  January,  1870. 

"E.  L.  Gale.      [Seal.] 
"Maby  Gale.     [Seal.]" 

It  was  duly  acknowledged  and  admitted  to  record  in  Ritchie 
county  on  March  15,  1870. 

When  these  grants  and  contracts  were  made,  Mary  Gale,  the 
wife  of  E.  L.  Gale,  owned  a  tract  of  land  lying  partly  in  Wood 
and  partly  in  Ritchie  county.  West  Virginia,  containing  about 
two  thousand  acres,  which  had  been  conveyed  to  Mary  Gale,  the 
wife  of  E.  L.  Gale,  as  long  ago  as  March  7,  1854. 

Subsequently  to  the  recordation  of  said  grants  and  contracts 
of  January  31,  1870,  and  October  23,  1873,  that  is,  on  January 


198    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

26,  1875,  said  Gale  and  wife  in  consideration  of  eight  thousand 
one  hundred  and  forty-six  dollars  and  fifty-six  cents,  conveyed 
to  James  M.  Stephenson,  Thomas  Leach,  W.  Vrooman,  C.  H. 
Shattuck  and  H.  H.  Moss  a  moiety  of  one  thousand  acres  of  this 
land  with  general  warranty  of  title,  which  deed  was  duly  re- 
corded on  July  6,  1875.  These  grantees  after\vards  for  con- 
venience in  managing  said  property  assumed  the  name  of  the 
Wood  County  Petroleum  Company.  They  claim,  that,  if  these 
grants  and  contracts  of  date  January  31,  1870,  and  October  23, 
1873,  were  binding  grants  and  contracts,  which  the  courts  would 
enforce  between  the  original  parties  to  them,  nevertheless  they 
would  not  be  enforced  against  them,  as  they  were  purchased  for 
valuable  consideration  without  notice  of  their  existence;  and 
they  insist,  that  the  recordation  of  these  grants  and  contracts 
cannot  be  regarded  as  giving  them  any  constructive  notice  of 
their  existence,  because  they  profess  to  grant  "exclusive  rights 
of  way  and  privilege  to  contract  and  maintain  one  or  more 
lines  of  tubing  for  the  transportation  of  oil  along,  through  and 
under  lands  owned  by  the  grantors  in  Ritchie  and  Wood  counties 
in  the  State  of  ^yest  Virginia;"  that  this  description  of  the 
lands,  through  which  said  rights  of  way  were  granted,  is  so 
utterly  vague  and  indefinite,  that  it  would  not  operate  when 
recorded  as  any  constructive  notice  to  a  subsequent  purchaser 
without  notice,  as  they  claim  to  be.  To  sustain  this  position 
they  rely  on  :\Iunday  v.  Vawter,  3  Gratt.  518,  and  Carrington 
v.  Goddin,  13  Gratt.  609. 

On  the  other  hand,  the  description  of  the  land  contained  in 
these  grants  and  contracts,  the  West  Virginia  Transportation 
Company  insist,  is  legally  equivalent  to  "all  the  lands  owned 
by  Gale  and  wife  in  Ritchie  and  Wood  counties,"  and  this  being 
the  legal  signification  of  the  description  of  the  land  in  these 
grants  and  contracts,  that  the  recordation  of  tliem  was  con- 
structive notice  to  every  one  of  the  existence  of  these  grants  and 
contracts.  To  sustain  this  they  rely  on  Warren  v.  Syme,  7  W. 
Va.  474.  They  also  insist,  that,  even  if  this  were  not  so,  the 
evidence  shows,  that  they  were  after  the  making  of  said  grants 
and  contracts  in  the  actual  possession  of  all  this  "Gale  tract," 
so  far  as  the  exclusive  possession  and  control  of  many  lines  of 
tubing  through  it  was  concerned,  and  that  subsequent  purchasers 
of  any  portion  of  this  "Gale  tract"  were  bound  to  inquire  into 


THE  COMMON  LAW  199 

the  nature  of  their  possession ;  and  had  they  done  so,  they  must 
have  discovered,  that  they  claimed  the  exclusive  right  of  way 
for  tubing  to  transport  oil  either  through  this  tract  or  such  as 
was  produced  upon  it;  and  therefore  they  are  chargeable  with 
implied  notice  of  the  claim  of  the  West  Virginia  Transporta- 
tion Company.  To  sustain  this  position  they  rely  upon  Daniels 
v.  Davison,  16  Ves.  249 ;  Wilson  v.  Wall,  6  Wall.  83 ;  French  v. 
Loyal  Co.,  5  Leigh  627;  Campbell  v.  Fetterman's  Heirs,  20  W. 
Va.  398. 

From  the  views  I  take  of  this  case  I  deem  it  unnecessary  to 
consider  or  determine,  whether  the  persons  known  as  the  Wood 
County  Petroleum  Company  are  or  are  not  to  be  regarded  as 
having  either  constructive  or  implied  notice  of  these  contracts 
and  grants  by  Gale  and  wife  with  and  to  the  West  Virginia 
Transportation  Company.  As  all  questions  involved  in  this 
cause  can  be  determined  without  considering  this  question  and 
by  confining  our  attention  to  the  question,  whether  the  courts 
ought  to  enforce  in  favor  of  the  West  Virginia  Transportation 
Company  these  grants  and  contracts  as  against  the  original 
obligors  and  grantors,  we  will  consider  this  latter  question  only. 

These  grants  and  contracts  are  on  their  face  ambiguous;  and 
it  has  been  held,  that,  when  this  is  the  case,  the  courts  will  look 
at  the  surrounding  circumstances  existing,  when  such  am- 
biguous contracts  were  made,  at  the  situation  of  the  parties  and 
the  subject-matter  of  the  contract,  and  sometimes  even  call  in 
aid  the  acts  done  by  the  parties  under  such  contracts,  as  afford- 
ing a  clue  to  the  intention  of  the  parties;  but  the  court  never 
resorts  in  such  cases  to  the  verbal  declarations  of  the  parties 
either  before  or  after  or  at  the  time  of  the  execution  of  the 
contracts  to  aid  it  in  construing  its  language.  See  Crislip's 
Guardians  v.  Cain,  19  W.  Va.,  p.  483,  and  the  authorities  there 
cited. 

The  contracts  were  in  the  ease  before  us  made  respectively  on 
July  31,  1870,  and  October  23,  1873.  The  parties  to  them  had 
made  on  September  23,  1868,  another  contract  in  precisely  the 
same  language,  except  that  by  it  was  granted  ' '  the  right  of  way 
to  construct  and  maintain  one  or  more  lines  of  tubing  for  the 
transportation  of  oil  along,  through  and  under  lands  owned  by 
them  in  Ritchie  county,"  while  these  new  contracts  under  con- 
sideration granted  instead  of  such  ' '  right  of  way ' '  and  ' '  exclu- 


200    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

sive  right  of  way."  When  these  ecmtracts  were  made  the 
grantors  owned  a  large  tract  of  land  of  about  two  thousand 
acres  in  Ritchie  and  Wood  counties,  West  Virginia,  which  was 
and  for  a  long  time  had  been  very  productive  in  valuable  petro- 
leum oil.  The  land  had  been  divided  into  small  lots  and  leased 
to  numerous  parties  for  terms  generally  of  twenty  years,  who 
sunk  wells  on  their  respective  lots,  paying  as  a  royalty  or  rent 
for  working  such  wells  one-fourth  of  the  oil  produced  from 
them.  The  production  of  oil  from  these  wells  was  some  twenty 
thousand  barrels  a  year,  and  there  were  upon  it  some  fifty 
tenants.  The  oil  produced  each  year  was  worth  from  sixty  to 
one  hundred  thousand  dollars. 

On  February  26,  1867  (Acts  of  1867,  p.  110),  the  Legislature 
of  West  Virginia  had  incorporated  the  West  Virginia  Transpor- 
tation Company  with  the  right  to  "lay  out  and  conduct  a  line 
or  lines  of  tubing  for  the  purpose  of  transporting  oil  through 
the  same  in,  through  or  along  the  oil  district  in  the  County  of 
Wirt."  This  charter  had  been  amended  February  20,  1868 
(see  Acta  of  1868,  pp.  63  and  64),  so  that  the  company  organ- 
ized under  this  act  of  February  20,  1867,  was  authorized  "to 
construct  and  maintain  a  line  or  lines  of  tubing  for  the  purpose 
of  transporting  petroleum  or  other  oils  through  pipes  in  the 
counties  of  Wirt,  Wood,  Ritchie  and  Pleasants.  And  the  said 
company  shall  have  power  to  enter  and  condemn  lands  and  to 
acquire  right  of  way  in  the  counties  aforesaid  for  the  purposes 
of  said  company  in  the  manner  prescribed  by  the  fifty-sixth 
chapter  of  Code  of  West  Virginia."  And  on  February  9,  1869 
(see  Acts  of  1869,  p.  8),  the  charter  of  this  company  was  again 
amended  and  it  was  declared  said  company  should  "have  power 
to  construct  or  maintain  pipes  or  tubing,  together  with  all 
necessary  and  proper  machinery,  telegraphs,  buildings  and  other 
appurtenances,  for  the  purpose  of  transporting  petroleum  or 
other  oils  or  liquids  through  such  pipes  or  tubing;  and  said 
company  shall  also  have  the  right  to  construct,  own  and  run 
tank-cars,  boats  and  other  receptacles  for  the  transportation  of 
petroleum  or  other  oils  or  liquids  and  to  receive  and  hold  such 
petroleum  or  other  oils  in  storage  and  to  buy  and  sell  the  same 
on  commission  or  otherwise."  Said  act  further  provided  the 
means  and  manner  whereby  lands  might  be  condemned  and 


THE  COMMON  LAW  201 

rights  of  way  acquired  in  said  counties  for  constructing  such 
pipe-lines  and  works. 

When  oil  was  first  struck  on  this  Gale  tract,  he  induced  this 
company  to  lay  a  line  connecting  this  tract  with  petroleum.  He 
then  with  his  wife  executed  the  contract  and  grant,  whereby 
he  gave  said  company  a  right  of  way  through  said  land;  but 
this  right  of  way  was  not  an  exclusive  right  of  way.  After- 
wards oil  was  struck  on  other  portions  of  said  Gale  tract  of 
land ;  and  he  proposed  to  this  company,  that,  if  they  would  lay 
a  pipe-line  to  these  new  points  of  production,  he  and  his  wife 
would  grant  them  an  exclusive  right  of  way  through  this  "Gale 
tract,"  so  far  as  it  lay  in  Ritchie  county.  This  was  agreed  to, 
and  the  contract  and  grant  dated  January  31,  1870,  was  ex- 
ecuted, and  subsequently  the  contract  and  grant  of  like  kind, 
so  far  as  the  "Gale  tract"  lay  in  Wood  county,  was  executed 
on  October  25,  1873.  Under  these  contracts  this  company  laid 
do\vn  pipe-lines  to  a  large  number,  probably  to  fifty  weUs  on 
this  "Gale  tract." 

On  June  26,  1875,  E.  L.  Gale  and  wife  conveyed  a  moiety  of 
one  thousand  acres  of  this  "Gale  tract"  for  eight  thousand  one 
hundred  and  forty-six  doUars  and  fifty  cents  to  persons  since 
constituting  the  Wood  County  Petroleum  Company;  and  they, 
believing  that  the  West  Virginia  Transportation  Company,  was 
exacting  from  them  and  their  tenants  illegal  charges  for  trans- 
portation; and  by  mixing  different  oils  and  by  other  violations 
of  their  charter  injuring  them,  concluded  to  lay  down  pipes  to 
the  various  wells  on  their  part  of  this  "Gale  tract,"  and  connect 
them  with  the  pipes  of  the  Ohio  River  Pipe-Line  Company, 
another  corporation  organized  for  transporting  oils.  This  was 
about  being  done,  when  it  was  prevented  by  injunction  awarded 
in  this  suit. 

These  facts  show  that  the  grants  and  contracts  of  January 
31,  1870,  and  October  25,  1873,  made  by  E.  L.  Gale  and  wife 
to  and  with  the  West  Virginia  Transportation  Company,  while 
ambiguous  on  their  face  when  interpreted  by  the  aid  of  the 
circumstances  of  the  case,  and  the  situation  and  conduct  of  the 
parties  in  carrying  them  out  were  designed  not  only  to  confer 
on  the  West  Virginia  Transportation  Company  the  right  of  way 
for  their  pipes  through  this  "Gale  tract"  of  two  thousand  acres 
in  Ritchie  and  Wood  counties,  but  also  to  confer  an  them  the 


202    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

exclusive  right  of  way,  that  is  to  say,  to  bind  the  grantors  in 
their  deeds  and  contracts  not  themselves  to  use  pipe-lines  to 
transport  oil  from  said  "Gale  tract"  and  not  to  grant  to  any 
other  person  or  persons  authority  to  lay  pipe-lines  through  said 
"Gale  tract"  to  transport  petroleum  oil  produced  either  on  it 
or  any  other  lands.  That  this  is  the  true  interpretation  of 
these  grants  and  contracts  is,  I  think,  apparent  from  Western 
Union  Telegraph  Co.  v.  Chicago  &>  Paducah  Railroad  Co.,  86 
111.  246  (29  American  R.  28),  and  from  Western  Union  Tele- 
graph Co.  V.  American  Union  TelegTaph  Co.,  65  Ga.  160  (38 
American  R.  781), 

It  remains  for  us  to  decide  whether  these  are  such  contracts, 
as  the  court  ought  on  the  application  of  the  West  Virginia 
Transportation  Company  to  enforce  against  the  obligors  or 
those  claiming  under  them,  assuming  that  those  so  claiming 
are  doing  so  with  notice,  at  the  time  they  purchased,  of  these 
grants  and  contracts  with  the  West  Virginia  Transportation 
Company  and  of  the  character  of  their  claim  under  these  con- 
tracts. 

The  reason  why,  it  is  insisted  by  the  counsel  of  the  appellees, 
these  contracts  ought  not  to  be  enforced  is,  that  they  are  con- 
trary to  public  policy.  The  com^mon  law  will  not  permit 
individuals  to  oblige  themselves  by  a  contract  either  to  do  or 
not  to  do  anything,  when  the  thing  to  be  done  or  omitted  is  in 
any  degree  clearly  injurious  to  the  public.  (Chappel  v.  Brock- 
way,  21  Wend.  R.  159.)  It  is  upon  this  principle  that  it  is 
settled,  that  contracts  in  restraint  of  trade  are  in  themselves, 
if  nothing  shows  them  to  be  rcasoimhle,  bad  in  the  eye  of  the 
law ;  and  though  such  contract  be  for  a  pecuniary  consideration, 
or,  what  is  the  same  thing,  though  it  be  under  seal  and  stipulate 
only  that  a  certain  trade  or  profession  shall  not  be  carried  on 
in  a  particular  place,  if  there  be  no  recitals  in  the  deed  or 
contract  or  no  averment  and  proof  showing  circumstances, 
which  render  such  contract  reasonahle,  the  contract  or  instru- 
ment is  void,  though  it  be  but  in  partial  restraint  of  trade. 
(Homer  v.  Graves,  7  Bing.  744;  Pierce  v.  Fuller,  8  Mass.  223.) 
Contracts  in  restraint  of  trade  are  for  the  most  part  contrary 
to  sound  policy  and  are  consequently  to  be  held  void.  This  is 
the  general  rule.  There  may  be  cases  where  the  contract, 
though  in  apparent  restraint  of  trade  to  some  partial  extent  is 


THE  COMMON  LAW  203 

neither  injurious  to  the  public  at  large  nor  even  to  the  obligors, 
and  when  this  is  made  to  appear  affirmatively,  the  courts  hold 
such  contracts  valid,  though  apparently  to  some  extent  in  re- 
straint of  trade.  If  the  contract  go  to  the  total  restraint  of  the 
trade  in  the  state  where  it  is  made,  it  is  necessarily  void,  what- 
ever be  the  condition  on  which  it  was  based.  Such  a  contract 
must  be  injurious  to  the  citizens  of  the  state  in  which  it  is  to 
operate.  For  however  small  the  state  in  which  he  was,  the  man 
making  such  contract  would  at  least  compel  himself  to  transfer 
his  residence  and  allegiance  to  another  state  in  order  to  pursue 
his  avocation.  (Chappel  v.  Brockway,  21  Wend.  159;  Taylor 
V.  Blanchard,  13  Allen,  374 ;  Dunlap  v.  Gregory,  10  N.  Y.  241 ; 
Horner  v.  Ashford,  3  Bing.  328 ;  Mitchel  v.  Reynolds,  1  P.  Wms. 
181;  Alger  v.  Thacher,  19  Pick.  51;  Smith's  Leading  Cases,  Vol. 
1,  Part  2,  p.  508.)  On  the  other  hand,  if  the  contract  be  but  in 
partial  restraint,  it  may  not  be  invalid;  for  there  may  be  good 
reason,  so  far  as  the  public  interest  is  concerned,  for  allowing 
parties  to  contract  for  an  apparent  limited  restraint,  as  that  a 
man  will  not  exercise  his  trade  or  profession  in  a  particular 
case.  And  if  such  good  reasons  are  shown,  such  contract  will 
be  upheld  as  not  contrary  to  public  policy.  (Chappel  v.  Brock- 
way,  21  Wend.  159;  Ross  v.  Sadgbeer,  21  Wend.  166;  Lange 
V.  Werh,  2  Ohio  State  R.  420.)  I  presume  that  it  is  not 
absolutely  necessary,  however,  that  such  good  reasons  should  be 
set  out  on  the  face  of  the  contract.  I  suppose  this  might  be 
averred  in  the  pleadings  and  proven.  (Ross  v.  Sadgbeer,  21 
Wend.  168 ;  Mitchel  v.  Reynolds,  1  P.  Wms.  181,  and  Homer  v. 
Ashford,  3  Bing.  322.) 

Though  a  contract  in  restraint  of  trade  be  in  all  other  re- 
spects reasonable,  and  be  not  otherwise  in  any  manner  preju- 
dicial to  either  the  public  or  the  obligor,  yet  the  simple  fact, 
that  it  restrains  trade  over  an  unreasonable  extent  of  territory, 
though  it  be  not  a  general  restraint  of  trade,  will  render  such 
contract  invalid  as  contrary  to  public  policy.  Thus  in  Lawrence 
V.  Kidder,  10  Barb.  641,  the  court  held,  that  a  contract,  whereby 
the  party  covenanted  that  he  would  not  sell  mattresses  in  New 
York  west  of  Albany,  was  held  because  of  the  large  extent  of 
the  territory,  in  which  this  restraint  operated,  as  contrary  to 
public  policy  and  void.  But  while  the  burden  is  on  the  party 
claiming  the  benefit  of  every  contract  in  restraint  of  trade  to 


204    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

show,  that  under  the  particular  circumstances  of  the  case  the 
partial  restraint  of  trade  is  of  no  prejudice  to  the  public,  yet 
by  what  circumstances  this  burden  would  be  met  would  seem 
to  be  difficult  to  state,  and  has  apparently  depended  a  good  deal 
on  the  particular  judge,  who  has  had  to  pass  judgment  on  the 
circumstances.  Thus,  in  Whitney  v.  Slayton,  40  Me.  231,  the 
court  held,  that  "an  agreement  not  to  engage  in  the  business  of 
iron-casting  within  sixty  miles  of  Calais  for  the  term  of  ten 
years"  was  valid;  but  they  based  their  judgment  in  part  on  the 
fact,  that  much  of  the  country  within  sixty  miles  of  Calais  was 
but  sparsely  settled,  and  there  were  but  few  places  of  business 
within  this  territory,  and  also  in  part  on  the  fact,  that  Calais 
was  on  the  extreme  border  of  Maine. 

In  The  Oregon  Steam  Navigation  Company  v.  Winsor,  20 
Wall.  64,  the  court  laid  down  the  rule  in  such  cases  in  a  manner 
substantially  corresponding  with  the  views  which  I  have  ex- 
pressed in  the  syllabus,  saying  "Questions  about  contracts  in 
restraint  of  trade  must  be  judged  according  to  the  circum- 
stances in  which  they  arise,  and  in  subservience  to  the  general 
rule,  that  there  must  be  no  injury  to  the  public  by  its  being 
deprived  of  the  restricted  party's  industry,  and  that  the  party 
himself  must  not  be  precluded  from  pursuing  his  occupation 
and  thus  prevented  from  supporting  himself  and  family."  But 
in  applying  these  principles  the  court  held,  that  when  A., 
engaged  in  navigating  waters  in  California  alone,  sold  in  1864 
a  steamer  to  B.,  who  was  engaged  in  the  business  of  navigating 
the  Columbia  river  in  Oregon  and  Washington  territories,  and 
B.  agreed  that  for  the  period  of  ten  years  he  would  not  employ 
this  steamer  in  the  waters  of  California,  the  contract  was  not 
void,  this  stipulation  being  reasonable  and  not  prejudicial  to 
the  public  interest,  as  the  vendor  of  the  steamer,  who  thus 
contracted  not  to  navigate  with  it  the  waters  of  California, 
proposed,  when  he  purchased  it,  to  navigate  with  it  the  waters 
of  Puget  Sound. 

In  Wright  v.  Ryder,  36  Cal.  342,  a  California  company  en- 
gaged in  navigating  the  waters  of  California  sold  one  of  its 
steamboats  to  an  Oregon  company  engaged  in  navigating  Ore- 
gon waters,  and  the  purchasers  agreed  not  to  navigate  the  waters 
of  California  for  ten  years  with  this  steamboat;  and  the  court 


THE  COMMON  LAW  205 

held  this  contract  to  be  void,  being  contrary  to  public  policy  and 
an  unreasonable  restraint  of  trade. 

In  all  such  cases  the  difficulty  lies  in  determining  what  are 
reasonable  and  what  unreasonable  restrictions  in  respect  to  the 
area,  within  which  the  trade  is  to  be  confined.  As  is  said  by 
Justice  Bradley  in  the  Oregon  Steam  Navigation  Company  v. 
Winsor,  20  Wall.  69,  "  It  is  obvious  on  first  glance,  that  what  is 
a  reasonable  restraint  must  depend  upon  the  circumstances  of 
the  particular  case;  although  from  the  uncertain  character  of 
the  subject  much  latitude  must  be  allowed  to  the  judgment  and 
discretion  of  the  parties.  It  is  clear,  that  a  stipulation,  that 
another  shall  not  pursue  his  trade  or  employment  at  such  a 
distance  from  the  person  to  be  protected,  as  that  it  could  not 
possibly  affect  or  injure  him,  would  be  unreasonable  and  absurd. 
On  the  other  hand,  a  stipulation  is  unobjectionable  and  binding, 
which  imposes  the  restraint  only  to  such  an  extent  of  territory, 
as  may  be  necessary  for  the  protection  of  the  party  making  the 
stipulatian,  provided  it  does  not  violate  the  two  indispensable 
conditions,  that  the  other  party  be  not  prevented  from  pursuing 
his  calling,  that  the  country  be  not  deprived  of  the  benefit  of 
his  exertions." 

I  will  here  say,  that  this  last  condition  is  the  one  which  the 
courts  must  ever  keep  in  view,  that  is,  that  the  restriction  is 
not  prejudicial  to  the  interest  of  the  public.  If  it  is,  the  contract 
is  contrary  to  public  policy  and  will  not  be  enforced.  The  cases 
show,  that  whether  the  public  interest  is  prejudiced  by  a  con- 
tract, which  restricts  a  business  or  profession  with  impartial 
limits,  will  often  depend  very  largely  on  the  character  of  the 
profession  or  calling.  Thus  in  Bunn  v.  Guy,  4  East,  190,  a 
contract  made  by  an  attorney,  solicitor  and  conveyancer,  that 
he  would  not  practice  his  profession  in  London  or  within  one 
hundred  and  fifty  miles  thereof,  was  held  valid  as  not  an 
unreasonable  restriction;  but  in  Sainter  v.  Ferguson,  7  Man. 
G.  &  Scott,  716  (62  Eng.  Com.  L.  R.),  the  question  was  dis- 
cussed whether  Macclesfield  or  within  seven  miles  thereof  was 
a  reasonable  restriction,  within  which  a  surgeon  and  apothecary 
was  to  be  restrained  from  practicing  his  profession,  the  court 
holding  that  it  was.  The  reason  why  the  courts  regard  as  a 
reasonable  restriction  to  the  practice  of  the  legal  profession  a 
territory  so  much  larger  than  would  be  allowed  as  a  reasonable 


206    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

restriction  to  the  practice  of  a  surgeon's  profession  is  obviously 
because  a  la-wyer  can  practice  his  profession  effectually  at  a 
long  distance  from  his  residence,  say  fifty  or  one  hundred  miles, 
by  correspondence  and  occasional  visits,  while  a  surgeon  can 
practice  his  profession  at  but  a  short  distance  from  his  resi- 
dence, as  nothing  can  be  done  by  him  except  by  personal  visits. 
The  public  therefore  may  not  be  injured  by  a  lawyer  being 
required  to  live  fifty  miles  distant,  while  they  would  be  en- 
tirely deprived  of  a  surgeon's  services,  if  he  was  required  to 
live  at  that  distance  from  them. 

According  to  the  modern  and  better  authorities,  if  the  re- 
striction of  the  particular  trade  or  business  be  partial  and 
reasonable,  when  all  the  circumstances  are  considered,  including 
the  restriction  and  object  of  the  parties  and  the  nature  of  the 
business,  which  is  restricted,  as  well  as  the  extent  of  the  restric- 
tion in  reference  to  time  and  space,  then  such  contract  imposing 
such  reasonable  restrictions  will  be  upheld  without  regard  to 
the  adequacy  or  inadequacy  of  the  consideration.  (Hitchcock 
V.  Coker,  6  A.  &  E.  438;  Leighton  v.  Wales,  3  M.  &  W.  545; 
Archer  v.  Marsh,  6  A.  &  E.  959.  In  Pilkington  v.  Scott,  15 
M.  &  W.  657,  the  law  is  thus  stated  by  Alderson,  B.  :  "That  if 
it  be  an  unreasonable  restraint  of  trade,  it  is  void  altogether; 
but  if  not,  it  is  lawful ;  the  only  question  being  whether  there  is 
a  consideration  to  support  it  and  the  adequacy  of  the  consid- 
eration the  court  will  not  enquire  into,  but  will  leave  the  parties 
to  make  the  bargains  for  themselves.  Before  the  ease  of  Hitch- 
cock V.  Coker,  6  A.  &  E.  439,  a  notion  prevailed,  that  the  con- 
sideration must  be  adequate  to  the  restraint;  that  was  in  truth 
the  law  making  the  bargain  instead  of  leaving  the  parties  to 
make  it  and  seeing  only  that  it  is  a  reasonable  and  proper  bar- 
gain." And  this  is  the  law  in  this  country.  See  Hubbard  v. 
Miller,  27  Mich.  15.  Guerand  v.  Dandelet,  32  Md.  R.  562.  It 
may  be  regarded  as  established  as  a  general  rule,  that  when 
a  covenant  in  restraint  of  trade  is  reasonable  and  is  valid  at 
common  law,  it  will  be  specifically  enforced  in  equity  by  en- 
joining the  obligor  from  violating  such  covenant.  See  Harrison 
v.  Gardner,  2  Madd.  R.  444;  Whitekar  v.  Howe,  3  Beav.  383; 
Guerand  v.  Dandelet,  32  Md.  562 ;  Beard  v.  Dennis,  6  Ind.  200 ; 
Butler  V.  B'arleson,  16  Vt.  176. 

The  cases  established,  that  the  restrictions,  which  may  be  put 


THE  COMMON  LAW  207 

upon  any  trade  or  business,  are  only  such  as  in  the  judgment 
of  the  courts  will  not  be  prejudicial  to  the  public ;  and  that  the 
extent  of  the  restriction  allowed  must  therefore  depend  largely 
on  the  character  of  the  trade  or  business.  In  most  cases  the 
trade  or  business  has  been  strictly  local  in  its  character,  and  a 
contract  prohibiting  one  from  engaging  in  such  strictly  local 
business,  w^hich  is  held  to  be  valid,  has  been  only  such  as  pro- 
hibited the  obligor  from  engaging  in  such  business  in  a  par- 
ticular place,  as  a  named  town  or  city.  To  permit  the  obligee 
to  stipulate  that  the  obligor  should  not  engage  in  such  strictly 
local  business  in  an  extent  of  country  exceeding  the  bounds  of 
a  given  town  or  city  would  be  to  permit  him  to  enforce  a 
contract  clearly  prejudicial  to  the  public  interest.  According 
to  the  spirit  pervading  the  decisions  everywhere  a  barber  would 
be  allowed  to  make  a  contract,  whereby  the  obligor  should  not 
be  allowed  to  carry  on  a  business  in  opposition  to  the  obligee  in 
a  certain  village,  town  or  city.  But  if  the  contract  prohibited 
the  obligor  from  carrying  on  such  a  business  in  such  town  or 
village  or  for  a  space  of  ten  miles  around  it,  such  a  contract 
would  be  no  doubt  held  to  be  void,  so  far  as  it  restricted  the 
obligor  from  engaging  in  the  business  outside  of  the  limits  of 
such  touTi  or  village,  though  according  to  the  decisions  such 
contract  would  be  enforced,  so  far  as  it  restricted  the  business 
within  the  limits  of  the  towm  or  village.  (Price  v.  Green,  16 
M.  &  W.  346 ;  Chesman  et  ux.  v.  Nainby,  2  Strange  739 ;  Woods 
v.  Benson,  2  Cromp.  &  J.  94 ;  Mallan  v.  May,  11  M.  &  W.  653 ; 
Nicholls  V.  Stretton,  10  Q.  B.  346;  Oregon  Steam  Navigation 
Company  v.  Winsor,  20  Wall.  70;  Lange  v.  Werk,  2  Ohio  St. 
520;  Horner  v.  Graves,  7  Bing.  738;  Guerard  v.  Bandelet,  32 
Md.  561.)  The  reason  for  such  holding  is  obvious;  for  as  a 
barber  could  not  have  customers  for  a  space  of  ten  miles  around 
his  shop,  such  a  restriction  on  another  person  could  be  of  no 
possible  benefit  to  the  obligee  in  such  a  contract,  while  it  might 
obviously  injure  the  public  by  depriving  another  community  of 
the  services  of  a  barber.  But  if  the  restriction  was  confined  to 
a  village,  the  contract  would  be  upheld,  as  it  mi^ht  be  actually 
of  benefit  to  the  inhabitants  of  the  village,  that  the  business  of 
barbering  should  not  be  overdone,  and  as  a  village  could  support 
but  one  barber,  the  villagers  would  probably  be  better  served, 
if  only  one  attempted  to  do  such  business  in  the  village. 


208    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

But  on  the  other  hand,  the  courts  might  uphold  as  valid  a 
contract  in  which  the  obligor  bound  himself  not  to  engage  in 
the  business  of  a  surgeon-dentist  or  milkman  within  ten  miles 
of  a  village,  for  such  a  circuit  is  not  greater  than  could  be 
reasonably  occupied  by  a  person  engaged  in  bu>siness  of  this 
description.  (Cook  v.  Johnson,  47  Conn.  175;  Proctor  v.  Sar- 
gent, 2  M.  &  G.  31.)  If  the  business  was  that  of  iron-making, 
the  extent  of  country,  within  which  the  court  would  permit  an 
iron-founder  to  restrain  another  from  engaging  in  the  business, 
would  he  still  larger.  Thus  in  Whitney  v.  Slayton,  40  Me.  224, 
the  court  upheld  a  contract,  which  prohibited  the  obligor  from 
engaging  in  a  business  of  this  character  for  a  space  of  sixty 
miles  around  Calais.  But  this,  it  is  believed,  is  a  space  greater 
than  would  under  ordinary  circumstances  be  allowed  to  be 
included  in  such  a  restrictian  in  this  sort  of  business.  A  lawyer 
has  been  allowed  to  stipulate  with  another,  that  the  obligor 
should  not  practice  in  London  or  within  one  hundred  and  fifty 
miles  thereof  (Bunn  v.  Guy,  4  East.  190)  ;  and  in  Whittaker  v. 
Howe,  5  Beav.  383,  the  court  went  still  further,  upholding  a 
contract,  which  prohibited  an  attorney  from  practicing  in  Great 
Britain  for  twenty  years.  It  is  believed,  that  such  contract 
ought  to  be  held  as  prejudicial  to  public  interest  and  void ;  but 
there  is  no  question  that  the  restriction  in  point  of  space  upon 
the  practice  of  the  legal  profession  would  be  allowed  to  an 
extent  much  greater  than  in  most  professions  or  occupations,  as 
the  profession  of  law  can  be  well  carried  on  over  an  extent  of 
country  much  larger  than  most  professions  or  occupations. 
There  is,  however,  one  sort  of  business  which  requires  for  its 
proper  prosecution  a  still  larger  extent  of  territory  than  even 
the  profession  of  a  lawyer,  that  is,  navigating  or  steam-boating; 
and  accordingly  the  courts  have  shown  a  disposition  to  uphold, 
contracts  prohibiting  an  obligor  to  engage  in  this  character  of 
business  over  a  very  large  extent  of  territory.  Thus  the  Supreme 
Court  of  the  United  States  in  Oregon  Steam  Navigation  Co.  v. 
Winsor,  20  Wall.  64,  upheld  a  contract,  which  prohibited  the 
obligor  from  navigating  with  a  particular  boat  the  waters  of  the 
State  of  California.  But  the  Supreme  Court  of  California,  in 
Wright  V.  Ryder,  36  Cal.  342,  refused  even  in  the  case  of  steam- 
boating  to  uphold  a  contract,  which  went  to  this  extent  in  re- 
stricting steam- boating.     The  cases  almost  universally  lay  down 


THE  COMMON  LAW  209 

the  rule,  that  any  contract,  whereby  any  obligor  stipulates,  that 
he  will  nowhere  engage  in  any  specified  business,  will  be  held 
void  as  against  public  policy;  but  to  even  this  rule  there  are 
exceptions,  it  being  regarded  by  the  courts  that  there  are  some 
species  of  employments  which  may  be  legitimately  subjected  to 
such  general  restraint.  For  instance,  this  rule  is  held  not  to 
extend  to  a  business,  which  is  secret  and  not  known  to  the 
public.  The  public  is  regarded  as  not  being  prejudiced  by  a 
contract  restraining  generally  such  a  business,  because  the 
public  has  no  rights  in  the  secret.  (Bryson  v.  Whitehead,  1 
Sim.  &  Stu.  74;  Peabody  v.  Norfolk,  98  Mass.  452.)  It  has 
been  held,  too,  tha.t  if  a  party  purchase  out  a  magazine,  he  may 
stipulate  with  the  vendor,  that  he  shall  not  publish  another 
periodical  of  a  like  nature  though  this  restrictio-n  be  general. 
(Ains worth  v.  Bentley,  14  Weekly  Rep.  630 ;  Ingram  v.  Stiff,  5 
Jur.  [N.  S.]  947.)  So  too  in  Stiff  v.  Cassell,  2  Jur.  (N.  S.) 
348,  it  was  held,  that  a  party  might  agree  to  write  a  tale  for  a 
periodical,  and  that  he  would  not  write  another  for  any  other 
periodical  for  a  year. 

In  Leather  Cloth  Co.  v.  Lorsont,  Law  Rep.  9  Eq.  345,  and 
Morse  Twist  Drill  &  Machine  Co.  v.  Morse,  103  Mass.  73,  these 
principles  are  laid  down,  that  while  contracts  are  void,  if  their 
object  is  to  deprive  the  state  of  the  benefit  of  the  labor,  skill  or 
talent  of  a  citizen,  yet  public  policy  requires,  that  when  a  man 
has  by  skill  or  other  means  obtained  something,  which  he  wants 
to  sell,  he  should  be  at  liberty  to  sell  it  in  the  most  advantageous 
way  in  the  market,  and  in  order  to  enable  him  to  do  this,  it  is 
necessary  that  he  should  be  able  to  preclude  himself  from  en- 
tering into  competition  with  the  purchaser,  provided  the  restric- 
tion is  not  unreasonable  by  going  beyond  the  extent  to  which  it 
would  be  a  benefit  to  the  purchaser.  If  a  general  restraint  in 
such  case  is  necessary  for  the  benefit  of  the  purchaser,  it  will 
be  enforced,  if  inserted  in  the  contract.  In  such  cases  the 
public  interest  on  the  whole  is  regarded  as  not  prejudicial  but 
rather  promoted  by  even  a  general  restraint,  if  necessary  to 
enable  the  inventor  to  realize  from  his  invention ;  for  the  public 
are  interested,  that  inventors  should  be  fairly  compensated. 
On  the  other  hand,  the  cases  lay  it  down  as  a  general  rule,  that 
any  trade  or  business  may  be  subjected  by  contract  to  a  partial 
restraint,  provided  that  the  restraint,  to  which  it  is  subjected, 

Kales  B.  of  T.  Vol.  1—14 


210    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

is  so  limited  as  that  it  may  benefit  the  public  or  at  least  not  be 
prejudicial  to  the  public  interest;  and  the  cases  show  that  the 
extent  to  which  this  restraint  may  be  legally  imposed  depends 
largely  upon  the  character  of  the  business  restrained. 

From  the  principles,  which  underlie  all  the  cases,  the  in- 
ference must  be  necessarily  drawn,  that  if  there  be  any  sort  of 
business,  which  from  its  peculiar  character  can  be  restrained  to 
no  extent  whatever  without  prejudice  to  the  public  interest, 
then  the  courts  would  be  compelled  to  hold  void  any  contract 
imposing  any  restraint,  however  partial,  on  this  peculiar  busi- 
ness, provided,  of  course,  it  be  shown  clearly  that  the  peculiar 
business  thus  attempted  to  be  restrained  is  of  such  a  character 
I  that  any  restraint  upon  it,  however  partial,  must  be  regarded 
by  the  court  as  prejudicial  to  the  public  interest. 

Are  there  any  sorts  of  business  of  this  peculiar  character? 
It  seems  to  me  that  there  are,  and  that  they  have  been  recog- 
nized as  possessing  this  peculiar  character,  both  by  the  statute- 
law  and  by  the  decisions  of  the  court.  Are  not  railroading  and 
telegraphing  forms  of  business,  which  are  now  universally 
recognized  as  possessing  this  peculiar  character?  Look  at  the 
Legislature  of  our  own  state  in  reference  to  these  sorts  of 
business  and  see  if  it  does  not  distinctly  recognize  them  as  pos- 
sessing this  peculiar  character.  Our  statute-law  provides  for 
the  condemnation  of  lands  by  railroads  and  telegraph  com- 
panies; and  by  pursuing  the  provisions  of  the  statute-law  these 
companies  may  acquire  lands  for  their  purposes  without  the 
consent  of  the  owners  of  such  lands.  (Ch.  52  and  Ch.  42  of 
the  Code  of  West  Virginia.)  In  conferring  on  such  companies  the 
power  to  exercise  at  their  pleasure  the  state 's  power  of  eminent 
domain  and  the  power  thus  to  take  land  without  the  owner's 
consent  for  railroading  and  telegraphing,  the  Legislature  has 
emphatically  declared  that  the  business  of  railroading  and  tele- 
graphing is  business  in  which  the  people  of  the  state  have  such 
great  and  direct  interest,  that  no  individual  land-owner  shall 
prevent  this  business  of  railroading  and  telegraphing  being 
carried  on  at  every  locality  in  the  state,  where  any  company 
may  choose  to  engage  in  such  business.  After  such  a  legislative 
declaration  the  courts  could  not  say  that  in  any  particular 
locality,  however  limited,  the  public  had  not  such  a  direct 
interest  in  railroading  and  telegraphing  that  its  interest  would 


THE  COMMON  LAW  211 

not  be  prejudiced  by  any  person  or  corporation  entering  into 
a  contract  with  another,  whereby  the  otiligor  should  bind  him- 
self to  impede  the  making  of  such  railroad  or  telegraph  through 
any  locality,  however  small,  by  refusing  to  grant  a  right  of  way 
through  such  locality  or  by  refusing  to  permit  a  railroad  or 
telegraph  to  pass  through  such  locality.  Such  a  contract  would 
be  necessarily  prejudicial  to  the  public  interest,  as  the  Legis- 
lature has  recognized  the  public  interest  to  have  a  telegraph  or 
railroad  through  every  parcel  of  land  as  so  clear  as  to  justify 
the  condemnation  of  every  such  parcel  of  land  without  any 
kind  of  enquiry  as  to  the  public  utility  of  the  particular  railroad 
or  telegraph  through  that  parcel  of  land. 

The  statute-law  assumes  as  self-evidence,  that  the  public  in- 
terest is  promoted  in  the  building  of  a  railroad  or  telegraph 
through  each  particular  parcel  of  land;  and  the  courts  must 
therefore  act  on  this  assumption  in  every  case,  and  as  a  con- 
sequence upon  the  principle,  that  the  public  interest  is  promoted 
by  the  business  of  railroading  and  telegraphing  being  done  on 
each  parcel  of  land,  the  courts  must  hold  in  accordance  with  the 
principles  underlying  all  the  decided  cases,  that  no  person  or 
corporation  can  restrict  this  business  being  done  on  any  parcel 
of  land,  however  small,  by  a  contract,  which  by  giving  to  another 
an  exclusive  right  of  way  or  in  any  other  manner  requires  the 
obligor  to  refuse  to  permit  the  doing  of  such  business  on  said 
land  by  any  and  all  companies,  who  are  willing  to  pay  a  just 
compensation  for  the  land  which  may  be  actually  used  in  the 
doing  of  such  business. 

In  the  Western  Union  Telegraph  Company  v.  American  Union  1  >V/ 
Telegraph  Company,  65  Ga.  160   (38  Am.  R.  781),  it  was  ex- 1  ' 
pressly  decided,  that  "a  contract  by  a  railroad  company  grant-  | 
ing  to  a  telegraph  company  the  exclusive  use  and  occupation  of  \ 
its  right  of  way  for  telegraph  purposes  is  void  as  in  restraint  of 
trade  and  against  public  policy."     The  court,  after  first  show- 
ing the  public  necessity  for  the  telegraph,  says:     "Shall  the 
means  then,  by  which  information  is  transmitted,  be  monop- 
olized by  a  contract?    When  such  exclusive  rights  exist,  or  such 
monopolies  are  established,  the  same  should  be  done  by  legis- 
lative grant  and  not  by  an  individual  contract.     Our  judgment 
therefore  is,  that  these  contracts  are  especially  made  and  en- 
tered into  to  cripple  and  prevent  competition,  and  they  thereby 


212    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

enable  the  party  to  fix  its  tariff  of  rates  at  a  maximum,  governed 
alone  by  the  necessities  of  its  patrons.  Sucli  contracts  are  not 
favored  by  the  law ;  they  are  against  the  public  policy  because 
they  tend  to  create  monopolies  and  are  in  general  restraint  of 
trade."  The  latter  words  above  quoted,  "they  are  in  general 
restraint  of  trade,"  may  not  be  entirely  accurate  language,  as 
the  contract  prevents  the  erection  of  another  telegraph  line 
only  on  the  land  of  the  grantors,  which  may  be  ever  so  small  a 
parcel  of  land.  But  it  is  true  tliat  to  some  extent  "such  contract 
is  in  restraint  of  this  telegraphing  business;"  and  for  the 
reasons,  which  we  have  given,  any  restraint  of  that  particular 
kind  of  business  is  contrary  to  public  policy  and  a  prejudice  to 
public  interest.  The  court  subsequently  say  truly:  "The 
state's  right  of  eminent  domain  extends  over  every  foot  of  its 
territory,  and  the  same  is  held  by  its  owners  in  subordination 
to  that  fixed  and  co-existing  right,  and  may  be  taken  for  public 
uses  upon  just  compensation"  (p.  784).  The  inevitable  infer- 
ence from  this  is,  that  no  one  can  give  to  a  railroad  or  a  telegraph 
company  the  exclusive  right  of  way  for  a  railroad  or  telegraph 
line  through  his  land,  however  small  a  parcel  it  may  be.  Such 
contract  is  contrary  to  public  policy.  And  if  it  were  a  valid 
contract,  it  would  defeat  the  state's  right  of  eminent  domain. 

The  foregoing  decision  is,  as  I  understand  the  case,  followed 
in  the  case  of  Western  Union  Telegraph  Co.  v.  Chicago  and  Pa- 
ducah  Railroad  Co.,  86  111.  246  (29  American  R.  31).  There 
the  railroad  company  had  contracted  with  the  telegraph  com- 
pany, that  it  would  furnish  and  distribute  along  its  track  cedar 
poles,  and  furnish  all  tlie  labor  necessary  to  erect  the  poles  and 
place  wires  and  insulators  thereon,  and  furnish  the  labor  to 
keep  the  telegraph-wire  in  repair,  the  wire,  insulators,  batteries 
and  instruments  and  all  other  material  being  furnished  by  the 
telegraph  company,  the  telegraph  company  to  give  the  use  of 
new  patents.  And  the  railroad  company  agi'eed  to  assure  to 
the  telegraph  company,  so  far  as  it  legally  might,  an  exclusive 
right  of  way  along  the  railroad  line  and  lands  for  commercial 
and  public  purposes,  and  agreed  to  discourage  competition  by 
withholding  facilities  and  assistance,  performing  to  competing 
lines  its  legal  duty  and  no  more.  There  was  proof,  which  ap- 
pears to  have  satisfied  the  court,  that  two  lines  of  wire  on  the 
same  telegraph-poles,  under  the  management  of  different  com- 


THE  COMMON  LAW  213 

panies,  could  not  be  worked  without  serious  annoyance  and 
inconvenience  and  injury  to  each  other.  The  court  held,  that 
this  contract  was  valid  and  could  be  executed,  so  far  as  it  pre- 
vented the  railroad  company  from  permitting  another  telegraph 
company  from  putting  up  wires  on  the  same  poles;  but  that  it 
was  contrary  to  public  policy,  if  it  was  to  be  interpreted  as 
preventing  another  telegraph  company  from  erecting  another 
line  of  poles  along  the  railroad  and  placing  on  them  another  line 
of  wires. 

If  I  am  right  in  the  views  which  I  have  expressed,  it  would 
be  contrary  to  public  policy  for  the  owner  of  a  water  grist-mill 
to  contract  with  another  person  the  owner  of  a  mill-site  in  the 
neighborhood,  that  he  would  not  erect  on  it  a  water  grist-mill, 
because  the  business  of  grinding  corn,  like  that  of  railroading, 
is  regulated  by  the  statute-law  as  one  in  which  the  public  has 
a  direct  interest,  and  the  necessary  land  may  be  condemned  for 
the  erection  of  such  water  grist-mill. 

We  will  now  proceed  to  apply  these  principles  of  law  to  the 
case  before  us.  Examining  the  contracts  betweeen  Gale  and 
wife  and  the  West  Virginia  Transportation  Company  of  date 
January  31,  1870  and  October  25,  1873,  the  first  thing  which 
strikes  us  is,  that  while  they  are  for  the  exclusive  right  of  way 
and  privilege  to  maintain  lines  of  tubing  for  transportation  of 
oil,  etc.,  through  this  Gale  tract,  yet  these  contracts  expressly 
reserve  the  privilege  to  remove  such  tubing  at  the  pleasure  of 
the  West  Virginia  Transportation  Company.  Now,  if  we  were 
to  assume  that  a  proper  contract  might  be  made  for  such  ex- 
clusive right  of  way,  we  should  be  compelled  to  hold,  that  these 
were  not  proper  contracts,  because  of  this  proviso  authorizing 
the  West  Virginia  Transportation  Company  to  remove  at  their 
pleasure  this  tubing,  and  of  course  at  their  pleasure  to  decline 
to  transport  the  oil  raised  on  this  "Gale  tract"  of  land.  It  is 
true  that  this  does  not  make  these  contracts  void  because  of  a 
want  of  consideration ;  for  the  trouble  which  the  West  Virginia 
Transportation  Company  was  at  in  laying  down  this  tubing 
would  be  a  sufficient  consideration  to  support  these  contracts,  if 
they  were  contracts  for  such  reasonable  restraint  of  trade  as 
that  they  ought  to  be  supported.  But  this  provision,  that  this 
tubing  might  be  removed  at  the  pleasure  of  the  West  Virginia 
Transportation  Company  itself,  made  these  contracts  unreason- 


214    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

able  restraints  of  trade,  so  far  a«  the  public  and  the  fifty  tenants 
on  this  "Gale  tract"  of  land  were  concerned.  The  position  of 
the  public  was,  that  no  one  by  these  contracts  could  with  any 
convenience  transport  to  market  the  oil  made  on  this  "Gale 
tract"  of  land  except  the  West  Virginia  Transportation  Com- 
pany; and  by  these  contracts  they  could  cease  to  do  so,  when- 
ever they  pleased  and  thereafter,  as  no  one  else  could  lay  down 
tubing,  the  public  would  necessarily  in  a  large  degree  be  de- 
prived of  the  oil,  which  would  otherwise  have  been  produced  on 
this  land.  Even  if  a  proper  contract  for  this  exclusive  use  of  a 
right  of  way  for  such  tubing  could  have  been  made,  this  would 
have  made  these  contracts  unreasonable  restraints  on  trade, 
contrary  to  public  policy  and  void. 

But  there  are  much  more  serious  objections  to  these  contracts 
than  these  provisions.  And  had  these  obnoxious  provisions  not 
been  in  these  contracts,  they  must  still  have  been  held  void  as 
contrary  to  public  policy.  The  West  Virginia  Transportation 
Company  could  not  ask,  that  the  courts  should  enforce  these 
contracts  against  Gale  and  wife,  much  less  against  their  as- 
signees, because  these  contracts  are  void  as  contrary  to  public 
policy.  It  is  an  attempt  to  restrain  trade  of  a  particular  form, 
which  from  its  character  is  recognized  by  the  statute  as  such  a 
business  as  can  not  be  restrained  even  partially.  A  business,  in 
which  the  general  public  has  such  a  direct  interest,  that  the 
statute  has  provided,  that  it  may  be  carried  on  upon  any  tract 
of  land  in  the  state  without  the  owner's  consent.  Hence  it 
follows,  that  any  contract  made  by  the  owner  intended  in  any 
degree  to  restrain  this  business  is  contrary  to  public  policy. 
This  business  of  transporting  oil  in  tubes  is,  like  railroading 
and  telegraphing,  a  business  recognized  by  our  statute-law  as 
one  in  which  the  public  has  so  great  and  direct  an  interest,  that 
to  promote  it  the  statute  authorizes  the  state 's  right  of  eminent 
domain  to  be  exercised  by  any  corporation  to  acquire  a  right  of 
way  for  its  tubing  through  any  parcel  of  land  in  the  state.  And 
from  what  has  been  said  it  must  follow,  that  no  person  can 
lawfully  contract  with  any  corporation  for  an  exclusive  right 
of  way  for  tubing  through  his  land,  whereby  oil  is  to  be  trans- 
ported. For  if  he  could,  he  would  thereby  defeat  the  state's 
right  of  eminent  domain. 

Our  conclusion  therefore  is,  that  such  a  contract,  so  far  as 


THE  COMMON  LAW  215 

it  confers  ou  the  corporation  a  right  of  way  through  the  grant- 
ors' land,  is  valid  and  binding  on  him  and  on  every  subsequent 
assignee  or  grantee  of  the  land;  but  so  far  as  it  attempts  to 
deprive  the  grantor  or  his  assignee  or  any  other  corporation 
from  exercising  the  right  to  lay  other  tubing  through  said  land 
for  the  transportation  of  oil,  such  contract  is  wholly  inoperative 
and  void,  being  contrary  to  public  policy  and  an  unreasonable 
restraint  on  trade.  I  feel  confident  that  I  am  justified  in  hold- 
ing this  attempted  restraint  on  the  original  grantor  and  cove- 
nantor as  inoperative  and  void  for  this  reason,  and,  of  course,  if 
this  be  true,  it  cannot  bind  any  subsequent  grantee  of  the  land, 
or  impede  any  other  corporation  in  acquiring  in  a  legal  manner 
a  right  of  way  for  the  transpo-rtation  of  oil  through  such  land. 
[In  the  balance  of  the  opinion  it  is  argued  that  "if  such 
contract  w^ere  obligatory  on  the  original  covenantor  or  grantor 
it  could  not  possibly  be  binding  upon  a  grantee  of  the  land  or  U/f 

any  other  corporation  seeking  a  right  of  way  through   such        J" 
land."]  ^^,  .        "^  .    f^ 

Judges  Snyder  and  Woods  concurred.  j   ^   "^iJ-^^^pi''^  .>v«^ 

Affirmed.  %^^^      A^         '^^^l!^' 


Section  2         "^/^^V^^^^^^ 


t^-. 


CONTRACTS     ACCOMPANYING     THE     SALE     OF     PEOPERTY  ,     ^ 

RESERVING    THE    SELLER'S    BUSINESS  '    ^\   *^^ 

HODGE  V.   SLOAN  ^     ijk'         ^ 

(Court  of  Appeals  of  New  York,  1887.    107  N.  Y.  244.)  v^^  v^ 

Appeal  from  general  term,  Supreme  Court,   Third   depart-  ^^j 
ment.  ' 

The  original  action  in  this  case  was  begun  by  Edward  Null 
against  Richard  Sloan  to  restrain  the  defendant  from  selling 
sand  off  of  a  parcel  of  land  said  by  plaintiff  to  the  defendant's 
grantor,  John  D.  Sloan.  Judgment  was  entered  for  defendant 
upon  an  order  which  affirmed  a  judgment  for  defendant  dis- 
missing the  complaint,  entered  upon  a  decision  of  the  court  at 
special  term.  After  appeal  to  this  court,  the  plaintiff  died, 
and  his  executor,  Augustus  M.  Hodge,  was  substituted  as  appel- 
lant.    On  the  9th   day  of  May,   1868,  Edward  Null  was  the 


216    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

owner  of  certain  land  containing  deposits  of  sand,  the  sale  of 
which  constituted  his  whole  business.  The  land  included  about 
forty  acres  and  upon  being  applied  to  by  John  D.  Sloan  for  a 
portion  of  the  land,  about  half  an  acre,  he  refused  to  sell, 
because  by  selling  he  would  injure  his  business.  Afterwards, 
upon  Sloan's  agreeing  not  to  sell  any  sand  off  of  the  land,  the 
plaintiff  sold  to  him  the  portion  of  the  land  he  wished.  A 
contract  of  sale  was  made  which  contained  such  agreement, 
and,  in  fulfillment  of  the  contract,  a  warranty  deed  was  given 
from  plaintiff  to  Sloan  containing  a  covenant  by  the  grantee 
"not  to  sell  any  sand  off  of  said  premises."  The  deed  was 
received  and  duly  recorded,  and  possession  taken.  Afterwards, 
Sloan  conveyed  to  his  son,  the  defendant,  Richard  Sloan,  by 
deed  containing  no  reference  to  the  covenant  in  the  deed  from 
plaintiff;  but  defendant,  at  the  time  of  taking  the  land,  had 
full  knowledge  of  the  existence  of  the  covenant.  Against  the 
protest  of  plaintiff,  he  opened  a  sand-pit,  and  proceeded  to  sell 
the  sand  therefrom.  The  court  held  that  the  covenant  wa^  void 
as  against  public  policy,  being  in  restraint  of  trade,  and  the 
complaint  was  dismissed. 

DANPORTIT,  J.  The  conclusion  of  the  trial  court  is  against 
our  ideas  of  natural  justice;  for  it  takes  from  o-ne  party  an 
advantage  which  he  refused  to  sell,  and  secures  to  the  other, 
without  price,  a  privilege  which  his  grantor  was  unable  to  buy. 
Nor  do  we  find  that  this  denial  of  priva^te  right  is  required  by 
any  rule  of  public  policy.  Assuming,  with  the  respondent,  that 
the  covenant  is  in  restraint  of  trade,  it  is  still  valid  if  it  imposes 
no  restriction  upon  one  party  which  is  not  beneficial  to  the 
other,  and  was  induced  by  a  consideration  which  made  it  reason- 
able for  the  parties  to  enter  into  it;  or,  in  other  words,  if  it  was 
a  proper  and  useful  contract,  or  such  as  could  not  be  disregarded 
without  injury  to  a  fair  contractor.  This  is  the  doctrine  of 
Chappel  V.  Brockway,  21  Wend.  157,  and  Ross  v.  Sadgbeer,  Id. 
166,  derived  by  a  learned  court  from  the  leading  case  of  Mitchel 
V.  Reynolds,  1  P.  Wms.  181,  and  an  examination  of  subsequent 
decisions.  It  is  also  so  amplified  and  discussed  in  a  case  just 
decided  by  this  court  (Match  Co.  v.  Roeber,  106  N.  Y.  473, 
opinion  by  Andrews,  J.)  as  to  make  any  elaboration  of  the 
general  rule  quite  superfluous. 


THE  COMIVION  LAW  217 

The  subject  of  the  contract  at  the  bottom  of  this  controversy 
was  a  piece  of  land  which  Sloan  wanted  to  buy,  and  which  the 
plaintiff  was  willuig  to  sell,  provided  it  should  not  be  made  an 
instrument  for  the  destruction  of  his  means  of  livelihood,  or 
detrimental  to  his  business.  The  principle  which  favors  free- 
dom of  trade  requires  that  every  man  shall  be  at  liberty  to 
work  for  himself,  and  shall  not  deprive  himself  or  the  state  of 
the  benefit  of  his  industry  by  any  contract  that  he  enters  into. 
The  same  principle  must  justify  a  party  in  withholding  from 
market  the  tools  or  instruments  or  means  by  which  he  gains  the 
support  of  his  family,  or  if,  as  in  the  case  before  us,  the  instru- 
ment or  means  are  susceptible  of  several  uses,  one  of  which  will 
work  mischief  to  himself  by  the  loss  or  impairment  of  his  liveli- 
hood, there  is  no  reason  of  public  policy  which  requires  him, 
upon  a  sale  of  the  instrument,  to  consent  to  that  use,  or  prohibits 
him  from  binding  his  vendee  against  it. 

We  see  nothing  unreasonable  in  the  restriction  which  the 
grantee  imposed  upon  himself.  He  was  not  a  dealer  in  sand. 
He  wanted  to  buy  the  land  on  the  best  terms  and  in  the  most 
advantageous  way;  and,  in  order  to  do  this,  it  was  necessary 
that  he  should  preclude  himself  from  so  using  it  as  that,  by  its 
means,  he  should  enter  into  competition  with  the  vendor.  I 
cannot  find  that  such  a  covenant  contravenes  any  rule  of  public 
policy,  nor  that  it  is  incapable  of  being  enforced  in  a  court  of 
equity.  It  stands  upon  a  good  consideration,  and  is  not  larger 
than  is  necessary  for  the  protection  of  the  covenantee  in  the 
enjoyment  of  his  business. 

But  the  question  presented  is,  upon  the  conceded  facts,  really  ? 
one  of  individual  right,  with  which  the  question  of  public  policy  • 
has  little  if  anything  to  do. 

Parties  competent  to  contract  have  contracted,  the  one  to  sell 
a  portion  of  his  land,  but  only  upon  such  conditions  as  will 
protect  himself  in  the  prosecution  of  business  carried  on  upon 
the  residue,  the  other  agreeing  to  buy  for  a  consideration  af- 
fected by  that  condition,  and  enabled  to  do  so  only  by  acceding 
to  it,  and  he  therefore  binds  himself  by  eontract  to  limit  the  use 
of  the  land  purchased  in  a  particular  manner.  There  seems  no 
reason  why  he  and  his  grantee,  taking  title  with  notice  of  the 
restriction,  should  not  be  equally  bound.  The  contract  was 
good  between  the  original  parties,  and  it  should,  in  equity  at 

Kales  R.  of  T.  Vol.  1—15 


218    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

least,  bind  whoever  takes  title  with  notice  of  such  covenant.  By- 
reason  of  it,  the  vendor  received  less  for  his  land ;  and  the  plain 
and  expressed  intention  of  the  parties  would  be  defeated  if  the 
covenant  could  not  be  enforced  as  well  against  a  purchaser  with 
notice  as  against  the  original  covenantor.  In  order  to  uphold 
the  liability  of  the  successor  in  title,  it  is  not  necessary  that  the 
covenant  should  be  one  technically  attaching  to  and  concerning 
the  land,  and  so  running  with  the  title.  It  is  enough  that  a 
purchaser  has  notice  of  it;  the  question  in  equity  being,  as  is 
said  in  Tulk  v.  Moxhay,  11  Beav.  571,  2  Phil.  Co.  774,  not 
whether  the  covenant  ran  with  the  land,  but  whether  a  party 
shall  be  permitted  to  use  the  land  inconsistently  with  the  con- 
tract entered  into  by  his  vendor,  and  with  notice  of  which  he 
purchased.  This  principle  was  applied  in  Tallmadge  v.  Bank, 
26  N.  Y.  105,  where  the  equity  in  regard  to  the  manner  of  im- 
provement and  occupation  of  certain  land  grew  out  of  a  parol 
contract  made  by  the  owner  with  the  purchaser,  and  was  held 
binding  upon  a  subsequent  purchaser  with  notice,  although  his 
legal  title  was  absolute  and  unrestricted. 

In  Trustees  v.  Lynch,  70  N.  Y.  440,  the  action  was  brought  to 
restrain  the  carrying  on  of  business  on  certain  premises  in  the 
City  of  New  York,  of  which  the  defendant  was  owner,  upon  the 
ground  that  the  premises  were  subject  to  a  covenant  reserving 
the  property  exclusively  for  dwelling-houses.  The  court  below 
held,  among  other  things,  that  the  covenant  did  not  run  with 
the  laud,  and  that  the  restriction  against  carrying  on  any  busi- 
ness on  the  premises  was  liable  to  conflict  with  the  public  wel- 
fare, and  judgment  was  given  for  the  defendant.  Upon  appeal 
it  was  reversed;  the  covenant  held  to  be  binding  upon  a  sub- 
sequent grantee  with  notice,  as  well  upon  the  o-riginal  covenan- 
tor. So  the  restraint  may  be  against  the  use  of  the  premises 
for  one  or  another  particular  purpose,  as  that  no  building 
thereon  "shall  be  used  for  the  sale  of  ale,  beer,  spirits,"  etc., 
"or  as  an  inn,  public-house,  or  beer-house"  (Carter  v.  Williams, 
L.  R.  9,  Eq.  678)  ;  and  it  is  said  a  man  may  covenant  not  to 
erect  a  mill  on  his  own  lands  (Mitchel  v.  Reynolds,  supra). 

Many  other  instances  of  restraint  might  be  referred  to;  and 
where  it  is  of  such  nature  as  concerns  the  mode  of  occupying  or 
dealing  with  the  property  purchased  in  the  way  of  business 
operations,  or  even  the  omission  of  all  business,  or  certain  kinds 


THE  COMMON  LAW  219 

of  business,  or  the  erection  or  non-erection  of  buildings  upon 
the  property,  we  see  no  reason  to  doubt  the  validity  of  an  agree- 
ment, fair  and  valid  in  other  respects,  which  secures  that 
restraint.  Indeed,  it  seems  well  settled  by  authority  that  a  per- 
sonal obligation  so  insisted  upon  by  a  grantor,  and  assumed  by 
a  grantee,  which  is  a  restriction  as  to  the  use  of  the  land,  may 
be  enforced  in  equity  against  the  grantee  and  subsequent  pur- 
chasers with  notice.  Parker  v.  Nightingale,  6  Allen,  341,  344; 
Burbank  v.  Pillsbury,  48  N.  H.  475.  Nor  is  it  essential  that  the 
assignees  of  the  covenantor  should  be  named  or  referred  to. 
Moriand  v.  Cook,  L.  R.  6,  Eq.  252.  In  Tulk  v.  Moxhay,  1  Hall 
&  Tw.  105,  it  was  said  that  the  jurisdiction  of  the  court  in  such 
cases  is  not  fettered  by  the  question  whether  the  covenant  does 
or  does  not  run  with  the  land.  In  Jhat  case  the_  purchaser  of 
the  land,  which  was  conveyed  to  him  in  fee-simple,  covenanted 
with  the  vendor  that  the  land  sliould  be  used  and  kept  in  orna- 
mental'repair  as  a  pleasure-garden,  and  it  was  held  that  the 
vendor  was  entitled  to  an  injunction  against  the  assignee  of  the 
purchaser  to  restrain  them  from  building  upon  the  land.  Upon 
the  appeal,  the  chancellor  (Cottenham)  said:  "I  have  no 
doubt  whatever  upon  the  subject.  In  short,  I  cannot  have  a  doubt 
upon  it,  without  impeaching  what  I  have  considered  as  the 
settled  rule  of  this  court  ever  since  I  have  known  it.  Where 
the  owner  of  a  piece  of  land  enters  into  contract  with  his  neigh- 
bor, founded,  of  course,  upon  a  valuable  or  other  good  consid- 
eration, that  he  will  either  use  or  abstain  from  using  his  land  in 
such  a  manner  as  the  other  party  by  the  contract  particularly 
specifies,  it  appears  to  me  the  very  foundation  of  the  whole  of 
its  jurisdiction  to  maintain  that  this  court  has  authority  to 
enforce  such  a  contract.  It  has  never,  that  I  know  of,  been 
disputed."  The  question  before  the  court  was  stated  to  be 
whether  a  party  taking  property  with  a  stipulation  to  use  it  in  a 
particular  manner,  will  be  permitted  by  the  court  to  use  it  in 
a  way  diametrically  opposite  to  that  which  the  party  has  stip- 
ulated for.  .  .  .  "  Of  course, "  he  says,  "  of  course,  the  party 
purchasing  the  property  which  is  under  such  restriction  gives 
less  for  it  than  he  would  have  given  if  he  had  bought  it  unin- 
cumbered. Can  there,  then,  be  anything  much  more  inequitable 
or  contrary  to  good  conscience,  than  that  a  party  who  takes 
property  at  a  less  price  because  it  is  subject  to  a  restriction 


220    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

should  receive  the  full  value  from  a  third  party,  and  that  such 
third  party  should  then  hold  it  unfettered  by  the  restriction 
under  which  it  was  granted?  That  would  be  most  inequitable, 
most  unjust,  and  most  unconscientious;  and,  as  far  as  I  am 
informed,  this  court  never  would  sanction  any  such  course  of 
proceeding."  And,  in  language  very  applicable  to  the  case 
before  us,  he  adds:  "Without  adverting  to  any  question  about 
a  covenant  running  with  land  or  not,  I  consider  that  this  piece 
of  land  is  purchased  subject  to  an  equity  created  by  a  party 
competent  to  create  it;  that  the  present  defendant  took  it  with 
distinct  knowledge  of  such  equity  existing ;  and  that  such  equity 
ought  to  be  enforced  against  him,  as  it  would  have  been  against 
the  party  who  originally  took  the  land  from  Mr.  Tulk."  This 
case  is  cited  and  followed,  as  to  restrictive  covenants,  in  many 
cases.  Brown  v.  Railway  Co.,  2  Q.  B.  Div.  406 ;  Railway  Co.  v. 
Gomm,  20  Ch.  Div.  562,  576. 

Each  case  will  depend  upon  its  own  circumstances,  and  the 
jurisdiction  of  a  Court  of  Equity  may  be  exercised  for  their 
enforcement,  or  refused,  according  to  its  discretion  (Trustees 
V.  Thacher,  87  N.  Y.  311)  ;  but,  where  the  agreement  is  a  just 
and  honest  one,  its  judgment  should  not  be  in  favor  of  the 
wrong-doer.  Such  seems  to  us  the  character  of  the  covenant  in 
question.  It  is  restrictive,  not  collateral  to  the  land,  but  relates 
to  its  use ;  and,  upon  the  facts  found,  the  plaintiff  is  entitled  to 
tlie  equitable  relief  demanded. 

Brewer  v.  Marshall,  19  N.  J.  Eq.  537,  is  cited  by  the  respond- 
ent as  requiring  a  different  construction.  The  general  rules  in 
regard  to  such  covenants  are  not  stated  differently  in  that  case ; 
but,  in  the  opinion  of  the  court,  it  was  not  one  for  the  interfer- 
ence of  the  Court  of  Equity.  Among  many  other  cases,  Tulk 
V.  Moxhay,  supra,  is  cited ;  and  the  learned  court  say :  "It  will 
be  found,  upon  examination,  that  these  decisions  proceed  upon 
the  principle  of  preventing  a  party  having  knowledge  of  the 
just  rights  of  another  from  defeating  such  rights,  and  not  upon 
the  idea  that  the  engagements  enforced  create  easements,  or  are 
of  a  nature  to  run  with  the  land.  In  some  of  the  instances  the 
language  of  the  court  is  very  clear  on  this  point."  And,  from 
a  ' '  review  of  the  authorities, ' '  the  court  say  "  it  is  entirely  satis- 
fied that  a  Court  of  Equity  will  sometimes  impose  the  burden 
of  a  covenant  relating  to  lands  on  the  alienee  of  such  lands,  on  a 


THE  COMMON  LAW  221 

principle  altogether  aside  from,  the  existence  of  an  easement,  or 
the  capacity  of  such  covenant  to  adhere  to  the  title. ' '  The  only- 
question  which  the  court  regarded  as  possessed  of  difficulty  was 
whether  the  covenant  then  in  controversy  was  embraced  within 
the  proper  limits  of  this  branch  of  equitable  jurisdiction.  By 
a  divided  court,  an  injunction  was  denied.  The  circumstances 
were  quite  unlike  those  before  us,  and  the  decision  furnishes  no 
precedent  for  us  to  follow. 

The  judgment  appealed  from  should  be  reversed,  and  new 
trial  granted,  with  costs  to  abide  the  event. 

All  concur,  except  Peckham,  J.,  not  voting,  and  Andrews 
and  Earl,  JJ.,  dissenting,  because,  in  their  opinion,  the  covenant 
was  a  personal  one,  and  did  not  bind  the  grantee  of  the  land. 

Judgment  reversed. 


Section  3 
exclusive  contracts  of  sale  and  purchase 

NEWELL  V.  MEYENDORFF 

(Supreme  Court  of  Montana  Territory,  1890.     9  Mont.  254.) 

DE  WITT,  J.2'^  The  record  in  the  case  presents  the  following 
history:  The  complaint  is  for  the  price  of  cigars  sold  and 
delivered  by  plaintiffs  to  defendant.  Defendant  answered,  and 
admitted  the  sale  and  delivery,  and  set  up  in  recoupment  a  con- 
tract, the  terms  of  which  were,  generally,  that  in  1886  he  was 
dealing  in  cigars ;  that  plaintiffs  approached  him  to  sell  their  i 
"Flor  de  B.  Garcia  Cigars,"  agreeing  that  defendant  should 
have  the  sole  and  exclusive  right  of  selling,  handling  and  deal- 
ing in  said  cigars  in  Montana;  that  plaintiffs  would  not  sell 
said  cigars  to  any  one  else  in  the  territory;  that  defendant 
would  cease  advertising  and  selling  various  other  valuable 
brands  of  cigars  in  which  he  was  dealing,  and  from  the  sale  of 
which  he  was  deriving  much  profit;  that  he  would  accept  said 
sole  agency,  would  purchase  said  brand  of  cigars  from  plaintiffs, 

25 — Only  that  part  of  the  opinion       of  the  court  below  sustaining  a  de- 
is  given  which  relates  to  the  ruling      murrer  to  the  answer. 


222    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

and  would  introduce  and  promote  the  sale  thereof  to  the  best 
of  his  ability.  The  answer  further  alleges,  in  detail,  the  per- 
formance by  defendant  of  his  part  of  the  contract,  and  the 
expenditure  of  large  sums  of  money  in  placing  said  cigars  upon 
the  market.  Then  follows  the  allegation  of  breach  by  plaintiffs, 
in  that  they  sold  the  said  brand  of  cigars  to  other  dealers  in  the 
territory,  by  which  breach  the  defendant  suffered  great  damage 
in  his  business,  which  damage  he  recoups  against  the  plaintiff's 
account  for  the  cigars  sold.  The  court  below  sustained  a  de- 
murrer to  this  answer,  on  the  ground  that  the  contract  pleaded 
was  void,  as  against  public  policy,  being  in  restraint  of  trade, 
and  could  not  be  pleaded  in  recoupment.     .     .     . 

We  will  first  construe  the  contract  as  to  whether  it  must  be 
considered  void  as  in  restraint  of  trade.  The  rule  that  contracts 
that  are  in  restraint  of  trade  shall  be  void,  as  against  public 
policy,  is  among  our  most  ancient  common-law  inheritances.  In 
Alger  V.  Thacher,  19  Pick.  51,  Morton,  J.,  says:  "As  early  as 
the  second  year  of  Henry  V.  (A.  D.  1415),  we  find,  by  the  year- 
books, that  this  was  considered  to  be  old  and  settled  law. 
Through  a  succession  of  decisions,  it  has  been  handed  down  to 
us  unquestioned,  till  the  present  time."  The  learned  judge 
traces  the  history  of  the  rule  to  its  modem  modification,  tliat 
"contracts  in  restraint  of  trade,  generally,  have  been  held  to 
be  void ;  while  those  limited  as  to  time  or  place  or  persons  have 
been  regarded  as  valid,  and  duly  enforced."  He  gives  the 
reasons  for  the  rule  in  the  foilowing  language:  "(1)  Such 
contracts  injure  the  parties  making  them,  because  they  diminish 
their  means  of  procuring  livelihoods,  and  a  competency  for  their 
families.  They  tempt  improvident  persons,  for  the  sake  of 
present  gain,  to  deprive  themselves  of  the  power  to  make  future 
acquisitions,  and  they  expose  such  person  to  imposition  and 
oppression.  (2)  They  tend  to  deprive  the  public  of  the  services 
of  men  in  the  employment  and  capacities  in  which  they  may 
be  most  useful  to  the  community  as  well  as  themselves.  (3) 
They  discourage  industry  and  enterprise,  and  diminish  the 
products  of  ingenuity  and  skill.  (4)  They  prevent  competition, 
and  enhance  prices.  (5)  They  expose  the  public  to  all  the  evils 
of  monopoly;  and  this  especially  is  applicable  to  wealthy  com- 
panies and  large  corporations,  who  have  the  means,  unless  re- 
strained by  law,  to  exclude  rivalry,  monopolize  business,  and 


THE  C0:\OI0N  LAW  223 

engross  the  market.  Against  evils  like  these,  wise  laws  protect 
individuals  and  the  public,  by  declaring  all  such  contracts 
void."    See,  also,  cases  in  that  opinion  cited. 

The  doctrine  is  again  well  stated  in  Lawrence  v.  Kidder,  10 
Barb.  641,  in  which  case  the  court,  Selden,  J.,  cites  with  ap- 
proval Bronson,  J.,  in  Chappel  v.  Brockway,  21  Wend.  157,  as 
follows:  "There  may  be  cases  where  the  contract  is  neither 
injurious  to  the  public  nor  the  obligor,  and  then  the  law  makes 
an  exception,  and  declares  the  agreement  valid."  In  Naviga- 
tion Co.  v.  Winsor,  20  Wall.  68,  Mr.  Justice  Bradley  says: 
"There  are  two  principal  grounds  on  which  the  doctrine  is 
founded  that  a  contract  in  restraint  of  trade  is  void  as  against 
public  policy.  One  is  the  injury  to  the  public  by  being  deprived 
of  the  restricted  party's  industry;  the  other  is  the  injury  to  the 
party  himself  by  being  precluded  from  pursuing  his  occupation, 
and  thus  being  prevented  from  supporting  himself  and  his 
family.  It  is  evident  that  both  these  evils  occur  when  the  con- 
tract is  general,  not  to  pursue  one's  trade  at  all,  or  not  to 
pursue  it  in  the  entire  realm  or  country.  The  country  suffers 
the  loss  in  both  cases;  and  the  party  is  deprived  of  his  occu- 
pation, or  is  obliged  to  expatriate  himself  in  order  to  follow  it. 
A  contract  that  is  open  to  such  grave  objections  is  clearly 
against  public  policy.  But  if  neither  of  these  evils  ensue,  and 
if  the  contract  is  founded  on  a  valid  consideration,  and  a  reason- 
able ground  of  benefit  to  the  other  party,  it  is  free  from  objec- 
tion, and  may  be  enforced."  -^ 

We  have  cited  these  reasons  for  the  rule  in  full,  in  order  to 
apply  them  to  the  contract  under  construction.  They  embody 
the  modem  doctrine,  as  held  by  the  authorities.  A  recitation 
alone,  of  the  rule  and  its  reasons,  seems  to  us  sufficient  to  take 
the  contract  under  consideration  out  of  the  operation  of  its 
prohibitions.  The  contract  is  not  general;  it  is  limited  as  to 
place  and  person.  Tlu-  i)ul)lic  is  not  deprived  of  the  alleged 
restricted  party's  industry.  On  the  contrary,  the  contract  pro- 
vides for  the  placing  upon  the  Montana  market  the  product  of 
the  plaintiffs'  industry,  by  the  selection  and  services  of  a  local 
Montana  agent,  interested  in  the  success  of  sales,  and  to  be 
rewarded  by  such  success.  Nor  is  there  any  injury  to  the  party 
himself,  the  plaintiffs,  by  their  being  precluded  from  pursuing 
their  occupation.     Rather,  by  the  contract,  they  seem  to  have 


224    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

sought  a  means  of  extending  the  field  of  their  operations,  and 
not  of  restricting  them.  In  the  light  of  the  authorities,  the  rule 
and  the  reasons  therefor,  and  the  facts,  we  are  ch^arly  of  the 
opinion  that  the  contract  was  not  in  restraint  of  trade,  and  not 
void.  It  was  simply  a  contract,  for  a  consideration,  for  the 
enlistment  of  the  services  of  an  agent  for  the  plaintiffs  in  their 
business.  The  court  below  was  therefore  correct  in  his  last  view 
of  the  contract.  It  follows  that  he  was  wrong  in  his  first  position 
in  sustaining  the  demurrer  to  the  original  answer. 

[Balance  of  opinion  omitted,] 

Blake,  C.  J.,  and  Harwood,  J.,  concur.^" 


ARNOT   V.   PITTSTON  &   ELMIRA   COAL   CO. 
(Court  of  Appeals  of  New  York,  1877.    68  N.  Y.  558.) 

RAPALLO,  J.  This  action  is  brought  to  recover  the  price 
of  about  2,700  tons  of  coal,  sold  and  delivered  to  the  defendant 
by  the  Butler  Colliery  Company  in  the  month  of  August,  1869. 
The  plaintiff  claims  under  an  assignment  from  the  last-named 
company. 

The  findings  of  the  referee  establish  that  this  coal  was  de- 
livered pursuant  to  a  contract  between  the  two  companies,  dated 
August  3,  1869,  and  the  defense  mainly  rests  upon  the  alleged 
illegality  of  that  contract.  The  referee  has  found  that  the 
circumstances  under  which  the  contract  was  made  were  as 
follows : 

The  Butler  Colliery  Company  was  a  Pennsylvania  corpora- 
tion, engaged  in  mining  and  vending  coal,  at  or  near  Pittston, 
Pennsjdvania.  The  defendant  was  also  a  Pennsylvania  cor- 
poration, engaged  in  the  same  business,  but  in  addition  had  a 

26 — Accord:    Schwalm  v.  Holmes,  Brewing  Ass'n  v.   Houek,  27  S.  W. 

49  Cal.  665;  Long  v.  Towl,  42  Mo.  692  (Tex.). 

545;    Brown   v.    Eoiinsavell,    78   111.  Similarly,    exclusive    contracts    of 

589 ;    Superior   Coal   Co.   v.   Lumber  purchase  have  been  held  valid :  Fuqua 

Co.,    236    111.    83;    Clark    Adm'r    v.  v.   Pabst  Brewing  Ass'n,   36  S.  W. 

Crosby,   37   Vt.   188;   EoUer  v.  Ott,  479,  480  (Tex.);  Kellogg  v.  Larkin, 

14  Kan.  609;  Pacific  Factor  Co.  v.  3  Pinney  123;  Twomey  v.  People's 

Adler,  90  Cal.  110;  Fuller  v.  Hope,  Ice  Co.,  66  Cal.  233. 
163    Pa.     St.     62;     Anheuser-Busch 


THE  COMMON  LAW  225 

coal  depot  at  Elmira,  New  York,  where  it  was  largely  engaged 
in  vending  anthracite  coal,  the  product  of  the  Pittston  mines, 
and  in  distributing  it,  by  canal  and  railway,  from  Elmira,  to 
dealers  and  consumers,  through  a  very  large  extent  of  country 
north  and  west  of  that  point.  Elmira  was  connected  with 
Pittston  by  canal,  and  was  the  chief  market  for  coal  in  western 
New  York,  and  prices  of  coal  were  there  established  for  the 
extensive  district  before  mentioned. 

The  purpose  of  the  defendant  in  making  the  contracts  in 
question  was  so  to  control  the  shipment  and  supply  of  coal  for 
the  Elmira  market  as  to  maintain  an  unnaturally  high  price  of 
coal  in  that  market,  and  to  prevent  competition  in  the  sale  of 
coal  therein,  and,  but  for  that  purpose,  the  defendant  would 
not  have  entered  into  the  contract  in  question  with  the  Butler 
Colliery  Company.  Of  all  these  facts  the  Butler  company  had 
notice  at  the  time  of  making  the  agreement. 

As  a  further  means  of  accomplishing  the  same  purpose,  the 
defendant  had  made  contracts  adapted  to  promote  it  with  all 
the  other  mining  proprietors  at  Pittston.  Of  these  contracts 
the  Butler  company  did  not  have  actual  notice. 

The  agreement  in  question,  entered  into  for  the  purposQ/ 
which  has  been  stated,  was  as  follows:  The  defendant  agreed! 
that  it  would  take  all  the  coal  which  the  Butler  company  should; 
desire  to  send  north  of  the  state  line,  not  exceeding  2,000  tons 
per  month,  at  the  regular  market-price  established  from  time  to 
time  by  the  "Wyoming  Coal  Exchange,  less  fifteen  per  cent,  per 
ton  commission,  and  that  settlements  should  be  made  on  the 
tenth  of  each  month  for  all  the  coal  delivered  during  the  pre- 
ceding month. 

The  Butler  Colliery  Company  agreed  that  it  would  not  sell 
coal  to  any  party  other  than  the  defendant,  to  come  north  of 
the  state  line,  during  the  continuance  of  the  agreement,  which 
was  during  the  season  of  canal  navigation  for  1869. 

The  other  provisions  of  the  agreement  related  to  mere  matters 
of  detail,  not  affecting  the  legal  question  involved. 

It  is  found  as  a  fact  in  the  case,  that  the  product  of  the 
Butler    Colliery    Company    largely    exceeded    2,000    tons    per , 
month. 

It  cannot  escape  observation  that  by  this  agreement  the 
Butler  CoUiery  Company  did  not  agree  to  sell  or  deliver  to  the 

Kales  E.  of  T.  Vol.  1—15 


226    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

defendant  all  of  the  product  of  its  mines,  nor  any  specific 
quantity  or  proportion  thereof.  It  was  entirely  optional  with 
it  whether  or  not  to  deliver  any  coal  to  the  defendant.  But  the 
defendant  did  agree  to  take  all  the  coal  which  the  Butler  com- 
pany might  desire  to  send  north,  to  the  extent  of  2,000  tons  per 
month.  This  undertaking  would  have  been  utterly  void  for 
want  of  mutuality,  had  it  not  been  for  the  agreement  of  the 
Butler  company  that  it  would  not  sell  coal  to  any  other  party, 
to  come  north  of  the  state  line.  The  only  consideration  for  the 
a^eement  of  the  defendant  to  take  of  the  product  of  the  Butler 
company  to  the  extent  of  2,000  tons  per  month,  consisted  in 
the  stipulation  of  that  company  not  to  sell  to  any  one  but  the 
defendant.  Without  that  stipulation,  the  paper  called  a  contract 
would  have  amounted  to  nothing.  Neither  party  would  have 
been  bound  to  deliver  or  accept  any  coal.  That  stipulation  was 
all  that  gave  vitality  to  the  contract. 

Bearing  in  mind  the  fact  found,  that  the  product  of  the 
Butler  company's  mines  was  largely  in  excess  of  2,000  tons  per 
month,  the  object  of  the  agi-eement  is  plain.  The  defendant, 
without  binding  itself  to  take  the  whole  product  of  the  mines 
of  the  Butler  company,  endeavored  by  this  agreement  to  keep 
all  of  the  coal  of  that  company  out  of  the  market,  except  the 
limited  amount  which  it  agreed  to  take,  and  thus  to  artificially 
enhance  the  price  of  that  necessary  commodity.  This  purpose 
was  the  basis  of  the  w^hole  agreement,  and,  as  is  found  by  the 
referee,  was  understood  by  both  parties  at  the  time  of  entering 
into  the  contract. 

That  a  combination  to  effect  such  a  purpose  is  inimical  to 
the  interests  of  the  public,  and  that  all  contracts  designed  to 
effect  such  an  end  are  contrary  to  public  policy,  and  therefore 
illegal,  is  too  well  settled  by  adjudicated  cases  to  be  questioned 
at  this  day.  (Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa. 
St.  R.  173 ;  People  v.  Fisher,  14  Wend.  9 ;  4  Denio,  352 ;  5  id. 
434;  44  N.  Y.  87,  and  cases  cited.) 

Every  producer  or  vendor  of  coal  or  other  commodity  has 
the  right  to  use  all  legitimate  efforts  to  obtain  the  best  price  for 
the  article  in  which  he  deals.  But  when  he  endeavors  to  arti- 
ficially enhance  prices  by  suppressing  or  keeping  out  of  market 
the  products  of  others,  and  to  accomplish  that  purpose  by  means 
of  contracts  binding  them  to  withhold  their  supply,  such  ar- 


THE  COMMON  LAW  227 

rangements  are  even  more  mischievous  than  combinations  not 
to  sell  under  an  agreed  price.  Combinations  of  that  character 
have  been  held  to  be  against  public  policy  and  illegal.  If  they 
should  be  sustained,  the  prices  of  articles  of  pure  necessity, 
such  as  coal,  flour  and  other  indispensable  commodities,  might 
be  artificially  raised  to  a  ruinous  extent  far  exceeding  any 
naturally  resulting  from  the  proportion  between  supply  and 
demand.  No  illustration  of  the  mischief  of  such  contracts  is 
perhaps  more  apt  than  a  monopoly  of  anthracite  coal,  the  region 
of  the  production  of  which  is  known  to  be  limited.  Parties  en- 
tering into  contracts  of  this  description  must  depend  upon  each 
other  for  their  execution,  and  cannot  derive  any  assistance  from 
the  courts. 

The  plaintiff,  however,  contends,  that  notwithstanding  the 
illegality  of  the  stipulation  of  the  Butler  Colliery  Company  not 
to  sell  coal  to  other  companies,  he  is  still  entitled  to  recover  for 
the  coal  actually  delivered  to  the  defendant. 

The  coal  was,  as  found  by  the  referee,  delivered  under  the 
illegal  contract.  The  purpose  of  the  vendee  was  against  public 
policy,  and  the  vendor  knew  it.  This  brings  us  straight  to  the 
question,  whether  the  vendor,  delivering  goods  under  such  a 
contract,  can  recover  for  the  price.  I  think  that  under  the 
circumstances  of  the  preseiit  case,  as  found  by  the  referee,  he 
cannot.  If  an  absolute  purchase  had  been  made  by  the  de- 
fendant of  the  Butler  Coal  Company  of  any  specified  quantity 
of  coal,  or  even  of  all  the  coal  w^hich  the  Butler  company  could 
produce,  that  contract  would  have  been  legal,  notwithstanding 
that  the  object  of  the  purchaser  was  to  secure  a  monopoly  and 
tliat  the  vendor  knew  it.  He  had  a  right  to  dispose  of  his  own 
goods,  and  (under  certain  limitations)  a  vendor  of  goods  may 
recover  for  their  price,  notwithstanding  that  he  knows  that  the 
vendee  intends  an  improper  use  of  them,  so  long  as  he  does 
nothing  to  aid  in  such  improper  use,  or  in  the  illegal  plan  of 
the  purchaser.  This  doctrine  is  establislied  by  authority,  and  is 
sufficiently  liberal  to  vendors.  But — and  this  is  a  very  im- 
portant distinction — if  the  vendor  does  any  thing  beyond  mak- 
ing the  sale,  to  aid  the  illegal  scheme  of  the  vendee,  he  renders 
himself  p<rrticeps  criminis,  and  cannot  recover  for  the  price. 
(Tracy  v.  Talmadge,  14  N.  Y.  162.) 

Now,  to  apply  these  principles  to  the  case  before  us.     If  the 


228    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Butler  Colliery  Company  had  sold  to  the  defendant  any  speci- 
fied number  of  tons  of  coal,  or  even  the  whole  product  of  its 
mines,  it  had  the  right  so  to  do  and  could  recover  for  the  price 
agreed  upon,  even  though  it  knew  that  the  object  of  the  pur- 
chaser was  to  obtain  a  monopoly  of  the  article.  But  when  it 
agreed  to  sell  only  a  part  of  its  product  to  the  defendant,  and 
stipulated  in  the  same  agreement,  and  as  part  thereof,  that  it 
would  not  sell  the  residue  to  any  other  party  to  go  north,  know- 
ing that  the  object  of  the  defendant  was  to  create  a  monopoly, 
and  that  such  stipulation  was  intended  as  one  of  the  means  of 
averting  competition,  it  made  itself  a  party  to  the  illegal 
scheme  of  the  defendant.  These  mutual  engagements  cannot 
be  separated.  It  is  perfectly  patent  that  one  was  the  consid- 
eration for  the  other,  and  that  the  defendant  would  not  have 
bought  the  coal  in  question  unless  the  Butler  company  had 
agreed  to  aid  it  in  preventing  competition. 

The  illegality  of  the  contract  seems,  by  the  opinion  of  the 
referee,  to  have  been  admitted  by  the  parties  when  the  case  was 
submitted  for  his  adjudication.  In  his  opinion,  which  shows 
that  he  fully  comprehended  the  subject,  he  yielded  with  ap- 
parent reluctance,  to  a  decision  of  Assistant  Vice-Chancellor 
Hoffman,  in  Jarvis  v.  Peck  (Hoff.  Ch.  479).  The  question 
presented  in  that  case  was  different  from  the  one  now  before 
us.  The  question  there  was,  whether,  when  a  bond  and  mort- 
gage were  given  for  two  considerations,  one  legal  and  the  other 
illegal,  the  bond  and  mortgage  could  be  sustained  on  the  legal 
consideration.  Assistant  Vice-Chancellor  Hoffman  argued, 
that,  if  the  legal  consideration  was  sufficient,  the  illegal  one 
might  be  disregarded.  Chancellor  Walworth  approved  the  re- 
sult, on  the  ground  that  both  covenants  were  legal.  I  do  not 
think  that  this  case  throws  much  light  upon  the  present  one. 
The  principle  of  Assistant  Vice-Chancellor  Hoffman's  decision 
seems  to  have  been  considerably  shaken,  to  say  the  least,  in  the 
case  of  the  Saratoga  Bank  v.  King  (44  N.  Y.  87).  It  is  difficult 
to  reconcile  those  cases. 

At  the  General  Term  the  judgment  of  the  referee  was  sus- 
tained upon  two  grounds ;  first,  that  the  illegal  provision  of  the 
ag^reement  was  independent  of,  and  separate  from,  the  legal 
part.  This  point  has,  I  think,  been  sufficiently  discussed.  The 
second  ground   is,   that   the   Butler   Colliery   Company,   after 


THE  COMMON  LAW  229 

having  made   the   first   month's   delivery  under  the   contract, 
rescinded  it  and  refused  to  carry  it  out,  and  that  this  action  is 
not  upon  the  contract,  but  in  disaflfinnance  of  it,  and  to  recover 
the  value  of  the  property  which  the  defendant  has  obtained 
under  it.     This  position  introduces  a  new  phase  of  the  case. 
If  the  Butler  company  made  the  contract  understandingly,  as 
found  by  the  referee,  it  is  difficult  to  see  how  it  could  acquire 
any  greater  rights  against  the  defendant  by  breaking  it,  than 
it  would  have  had  by  keeping  faith  and  performing  it.     To 
meet  this  difficulty  it  is  suggested  that  the   Butler  company 
never  made  the  illegal  agreement.     That  it  was  made  by  an 
agent  who  exceeded  his  authority,  and  that  when  it  came  to  the 
knowledge  of  the  company  it  repudiated  and  disaffirmed  it,  and 
that  this  action  is  in  disaffirmance  of  the  contract.  This  position 
is  not  sustained  by  the  facts.    The  action  is  not  in  disaffirmance 
of  the  contract.     If  the  contract  were  rescinded  there  would  be 
no  sale  of  the  coal,  and  the  claim  of  the  Butler  Coal  Company 
would  be  for  its  re-delivery,  or  for  damages  for  the  conversion. 
But   such   is  not  the  character  of   this  action.      The  present 
plaintiff  could  not  maintain  such  an  action.    He  has  no  title  to 
the  coal,  but  is  simply  assignee  of  the  claim  of  the  Butler  Coal 
Company  for  bill  of  coal  sold  and  for  advances  made  under  the 
agreement.     The  complaint  avers  the  sale  and  delivery  of  the 
coal  at  an  agreed  price,  and  claims  to  recover  that  price,  to- 
gether with  certain  advances  made  at  defendant's  request,  less 
certain  commissions,  all  of  which  elaims,  as  the  evidence  and 
findings  show,  conform  to  the  provisions  of  the  contract.     The 
plaintiff  alleges  in  the  complaint  the  assignment  to  him  of  this 
indebtedness,  and  thus  seeks  to  enforce  the  claim  of  the  Butler 
company  so  far  as  it  had  accrued  under  the  contract,  up  to  the 
time  when  it  repudiated  the  obligations  on  its  part  which  were 
favorable  to  the  defendant.    The  case  of  Peck  v.  Burr  (10  N.  Y. 
294)  is,  I  think,  an  authority  directly  adverse  to  the  position 
of  the  plaintiff,  and  shows  that  no  recovery  can  be  had  for  the 
partial   performance  of  an   illegal   contract,   rescinded   or   re- 
pudiated after  such  part  performance.     (See  also  Knowlton  v. 
Congress  &  Empire  Spring  Company,  57  N.  Y.  518,  530.) 

But,  furthermore,  the  referee  did  not  rest  his  judgment  on 
any  such  ground  as  now  suggested,  nor  do  his  findings  justify 
such  a  ground.     He  finds  that  the  contract  was  made  by  the 


230    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Butler  Colliery  Company.  That  it  knew  that  the  purpose  of 
the  defendant  in  making  it  was  to  obtain  a  monopoly  of  coal 
in  the  Elmira  market  and  prevent  competition  therein,  and 
that,  but  as  a  means  of  accomplishing  that  purpose,  it  would 
not  have  made  the  contract.  He  finds  that  the  coal  was  de- 
livered pursuant  to  that  contract;  that  after  its  delivery  the 
Butler  company  refused  to  deliver  any  more  coal  to  defendant, 
and  made  sales  to  other  parties  north  of  the  stipulated  line. 
But  there  is  no  finding  that  the  Butler  company  rescinded  the 
agreement  on  the  grounds  of  its  illegality,  or  of  any  want  of 
power  in  its  agent  to  make  it.  The  finding  is  that  the  rescission 
and  refusal  to  perform  were  without  reason  or  excuse.  Upon 
these  findings  we  do  not  think  the  alleged  rescission  gives  the 
plaintiff  any  better  right  to  recover  for  the  part  performance, 
than  he  would  have  had  if  the  Butler  company  had  performed 
all  its  stipulations. 

The  judgment  should  be  reversed  and  a  new  trial  ordered, 
with  costs  to  abide  the  event. 

All  concur  ;  Miller,  J.,  not  sitting. 

Judpment  reversed?'^ 


SOUTHERN  FIRE   BRICK   CO.  v.   GARDEN   CITY 
SAND   CO. 

(Supreme  Court  of  lUinois,  1906.     223  111.  616.) 

The  Garden  City  Sand  Company,  the  Hillsdale  Fire  Brick  & 
Clay  Company  (both  Illinois  corporations,  and  INIaria  Warner 
and  Jacob  B.  Warner,  of  Indianapolis,  Ind.,  filed  their  joint 
bill  in  the  Superior  Court  of  Cook  county,  April  4,  1903,  against 

27_See  also  Santa  Qara  Valley  it  was  held  that  an  exclusive  contract 
Mill  Co.  V.  Hayes,  76  Cal.  387 ;  for  the  sale  of  beer  to  one  of  a  num- 
Pacific  Factor  Co.  v.  Adler,  90  Cal.  ber  of  sellers  of  beer  who  were 
110;  Detroit  Salt  Co.  v.  National  associated  together  to  suppress  corn- 
Salt  Co.,  134  Mich.  103  (contract  for  petition  and  secure  a  monopoly,  was 
sale  of  entire  product)  ;  Clancey  v.  not  in  violation  of  the  common  law, 
Onondago  Fine  Salt  Co.,  62  Barb.  because  the  subject-matter  dealt  with 
395_  was    beer.      The    contract   was   held 

In  Anheuser-Busch  Brewing  Ass  'n  illegal    only    because   of    the    provi- 

V.  Houck,  27  S.  W.  692,  696  (Tex.),  sions  of  the  statute. 


THE  COMMON  LAW  231 

the  Southern  Fire  Brick  &  Clay  Company,  also  an  Illinois  cor- 
poration, and  Dick  N.  Lanyon,  by  which  they  sought  to  enjoin 
the  defendants  from  mining  fire  clay  upon  a  certain  tract  of 
land  in  Vermilion  county,  Ind.,  and  from  selling  tlie  same  to 
any  parties  other  than  the  complainants  at  any  time  prior  to 
September  10,  1909,  and  from  making  the  clay  into  fire  brick 
or  other  clay  products,  and  for  an  accounting  for  fire  clay 
already  manufactured  aiid  sold.  An  amended  and  supplemen- 
tal bill  was  filed  September  24,  1904,  alleging  that  on  September 
10,  1901,  a  contract  was  entered  into  in  writing  between  Dick 
N.  Lanyon,  first  party,  James  A.  Heber  and  Willis  S.  Bone- 
brake,  second  party,  the  Garden  City  Sand  Company,  third 
party,  the  Hillsdale  Fire  Brick  &  Clay  Company,  fourth  party, 
and  J.  B.  Warner  and  Maria  Warner,  fifth  party,  which  pro- 
vided as  follows: 

The  second  party,  James  A.  Heber  and  William  S.  Bone- 
brake,  agreed  to  mine,  grind,  and  operate  for  the  first  party, 
Dick  N.  Lanyon,  his  fire  clay  grinding  plant  located  at  Jones- 
dale  Switch,  Vermilion  county,  Ind.  Said  first  and  second 
parties  agreed  that  they  would  deliver  f.  o.  b.  cars  at  said  switch 
first-class  marketable  fire  clay  at  771/2  cents  per  ton,  in  such 
quantities  and  at  such  times  as  the  third,  fourth,  and  fifth 
parties  might  order.  The  first  party  agreed  to  erect  and  equip 
a  new  plant  at  his  own  expense  for  the  grinding  of  the  clay,  and 
the  second  parties  were  to  give  their  individual  personal  atten- 
tion to  the  operation  of  said  plant.  The  first  party  also  agreed 
not  to  operate  any  other  fire  clay  grinding  plant  on  any  land 
that  he  owned  or  controlled  in  the  state  of  Indiana,  and  the  first 
and  second  parties  agreed  not  to  sell  fire  clay  to  any  other 
persons  than  the  third,  fourth,  and  fifth  parties  during  the  time 
of  the  contract.  The  second,  third,  fourth,  and  fifth  parties 
agreed  to  cease  to  operate  a  certain  plant  located  at  Russell 
Switch,  Ind.,  but,  in  case  the  new  plant  could  not  supply  the 
demand,  the  old  plant  at  Russell  Switch  was  to  be  reopened. 
The  third,  fourth,  and  fifth  parties  agreed  that  they  would  not 
buy  fire  clay  produced  in  the  state  of  Indiana,  except  such  as 
was  produced  by  the  parties  to  the  contract,  and  they  would 
make  the  greatest  possible  effort  to  sell  all  the  fire  clay  so  pro- 
duced, and  would  jointly  order  and  pay  for  not  less  than  an 
average  of  forty  tons  for  every  working  day  during  the  period 


232    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  the  contract,  for  which  they  were  to  pay  ITYo  cents  per  ton, 
and  not  enter  into  any  combination  or  trust  for  the  purpose  of 
limiting  the  output  of  either  plant.  The  contract  was  to  be  in 
full  force  and  effect  for  a  period  of  eight  years,  and  after  its 
execution  on  October  26,  1901,  was  filed  for  record  in  the  re- 
corder's office  of  Vermilion  county,  Ind. 

The  bill  further  alleged  that  Lanyon  began  the  erection  of 
the  plant  on  his  land  at  Jonesdale  Switch,  but  that  it  was  never 
completed ;  that  on  September  17,  1902,  the  defendant,  the 
Southern  Fire  Brick  &  Clay  Company,  received  from  Lanyon 
and  wife  a  warranty  deed  conveying  about  ninety-three  acres  of 
the  lands  contained  in  the  contract,  with  full  notice  of  the  con- 
tract and  its  terms,  and  commenced  the  erection  of  a  plant  upon 
the  same,  and  was  subsequently  notified  by  complainants  that,  if 
necessary,  legal  steps  would  be  taken  to  restrain  it  from  operat- 
ing a  plant  or  selling  fire  clay  in  violation  of  the  terms  of  the 
contract;  that  on  May  28,  1902,  the  complainants  served  notice 
on  the  first  and  second  parties  that  more  than  enough  time  to 
equip  the  plant  which  was  to  be  built  by  Lanyon  had  expired, 
and  demanded  that  forty  tons  per  days  be  delivered  to  them, 
as  provided  in  the  contract;  that  notwithstanding  the  warning 
and  notice  the  Southern  Fire  Brick  &  Clay  Company  constructed 
its  plant  and  placed  the  product  upon  the  open  market  for  sale. 
It  is  further  alleged  that  the  complainants  were  the  first  persons 
to  introduce  and  place  upon  the  market  fire  clay  of  this  quality, 
under  the  name  of  "Dome  Fire  Clay"  as  a  trade-mark,  and 
they  had  built  up  a  large  trade  therein,  and  the  Southern  Fire 
Brick  &  Clay  Company  had  entered  the  market  in  direct  com- 
petition with  the  complainants,  and  represented  that  it  would 
sell  at  reduced  prices  the  same  clay  under  the  same  name.  The 
complainants  further  alleged  that  they  were  ready,  willing,  and 
able  to  accept  and  handle  the  fire  clay  to  be  furnished  by  the 
contract,  but  that  the  first  and  second  parties  had  failed  and 
refused  to  deliver  it,  the  prayer  being  for  an  injunction,  as 
above  stated. 

The  answer  of  the  defendants  admitted  most  of  the  material 
allegations  of  the  bill,  but  denied  that  complainants  had  any 
interest  in  or  lien  upon  the  lands  in  controversy,  and  averred 
they  had  an  adequate  and  complete  remedy  at  law.  Issue  being 
joined,  the  cause  was  referred  to  a  master  to  take  the  evidence 


THE  COMMON  LAW  233 

and  report  his  conclusions.  On  January  18,  1904,  during  the 
taking  of  the  evidence,  the  defendant  Lanyon  notified  the  com- 
plainants, in  writing  that  he  had  constructed  on  his  lands  de- 
scribed in  the  contract  a  plant,  and  was  ready  to  enter  upon 
and  carry  out  his  part  of  the  contract  and  awaited  the  order  of 
the  complainants. 

The  master,  in  his  report,  found  that  the  bill  was  filed  to 
secure  the  specific  performance  of  the  contract  and  for  an  in- 
junction to  restrain  the  violation  of  the  negative  covenants 
thereof;  that  such  an  action  would  not  lie;  that  the  injunction 
prayed  for  would  not  obtain  fire  clay  for  the  complainants,  but 
would  merely  prevent  the  defendants  from  selling  the  same 
elsewhere;  also  that  the  complainants  had  an  adequate  remedy 
at  law.  On  the  coming  in  of  that  report  the  cause  was  re- 
referred  to  the  same  master  and  additional  evidence  taken  and 
a  second  report  made,  in  which  the  master  found  that  the  con- 
tract was  in  the  form  of  a  trust  in  restraint  of  trade,  and  that 
the  sole  object  of  the  complainants'  bill  was,  not  to  obtain  fire 
clay,  but  to  prevent  the  defendant  company  from  entering  the 
market  in  competition  with  complainants.  Objections  were  filed 
to  the  report,  which  stood  as  exceptions,  and  they  were  over- 
ruled by  the  chancellor  and  the  bill  dismissed.  The  complain- 
ants prosecuted  an  appeal  to  the  Appellate  Court  for  the  First 
District,  where  the  decree  of  the  superior  court  was  reversed. 
This  appeal  is  from  that  judgment  of  reversal, 

WILKIN,  J.  (after  stating  the  facts).  The  first  question 
discussed  in  the  argument  of  counsel  is  whether  the  agreement 
of  September  10,  1901,  is  a  valid  contract,  as  was  held  by  the 
Appellate  Court,  or  is  in  restraint  of  trade  and  violative  of  the 
anti-trust  law  of  this  state  or  of  the  United  States,  as  found  by 
the  superior  court,  and  therefore  void.  The  appellants,  in 
support  of  the  latter  contention,  insist  mainly  upon  that  part 
of  the  contract  by  which  the  first  party  agrees  not  to  operate 
any  other  fire  clay  grinding  plant  on  any  land  owned  or  con- 
trolled by  him  in  the  state  of  Indiana,  or  to  sell  to  any  other 
person  during  the  time  of  the  contract,  and  in  which  the  third, 
fourth,  and  fifth  parties  agree  not  to  buy  fire  clay  produced  in 
that  state  other  than  from  the  first  and  second  parties. 

The  federal  statute  which,  it  is  claimed,  prohibits  such  a  con- 


234    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

tract,  provides  that  "every  contract  or  combination  in  the  form 
of  a  trust,  or  otherwise,  or  conspiracy  in  restraint  of  trade  or 
commerce  among  the  several  states  or  with  foreign  nations,  is 
hereby  declared  to  be  illegal."  The  statute  of  this  state  pro- 
vides: "If  any  corporation  organized  under  the  laws  of  this 
or  any  other  state  or  country  for  transacting  or  conducting  any 
kind  of  business  in  this  state,  or  any  partnership  or  individual 
or  other  association  of  persons  whosoever,  .  .  .  shall  enter 
into,  become  a  member  of  or  party  to  any  pool,  agreement,  con- 
tract, combination  or  confederation  to  fix  or  limit  the  amount 
or  quantity  af  any  article,  commodity  or  merchandise  to  be 
manufactured,  mined,  produced  or  sold  in  this  state,  such  cor- 
poration, partnership,  or  individual  or  other  association  of  per- 
sons shall  be  deemed  and  adjudged  guilty  of  a  conspiracy  to 
defraud,  and  be  subject  to  indictment  and  punishment,  as  pro- 
vided in  this  act."  Kurd's  Rev.  St.  1905,  c.  38,  p.  725,  §  269a. 
The  object  of  these  statutes  is  to  prohibit  the  formation  of 
trusts  and  combinations  and  remove  all  obstructions  in  restraint 
of  trade  and  free  competition.  It  was  not  the  purpose  of  either 
law  to  hinder  or  prohibit  contracts  on  the  part  of  corporations 
or  individuals  made  to  foster  or  increase  trade  or  business.  But 
a  contract  may  incidentally  restrain  competition  or  trade  with- 
out violating  the  statutes,  if  its  chief  purpose  is  to  promote  and 
increase  the  business  of  those  who  enter  into  it.  "Agreements 
in  general  restraint  of  trade  are  void,  but  those  in  reasonable 
partial  restraint,  founded  upon  a  valid  consideration,  may  be 
sustained.  But  this  rule  does  not  apply  to  corporations  engaged 
in  a  public  business.  A  contract  embracing  parts  of  several 
states,  and  contracts  to  sell  the  goods  of  a  certain  manufacturer, 
not  to  lease  a  certain  store  for  a  particular  business,  not  to 
transact  a  particular  business  in  a  certain  town,  particularly 
if  the  period  is  limited,  agreements  that  certain  land  shall  not 
be  used  for  ferry  purposes,  and  an  agreement  by  a  physician 
not  to  practice  within  a  six-mile  territory,  have  been  held  valid. 
Agreements  not  to  do  business  in  a  certain  state  or  elsewhere 
where  it  would  compete  with  a  certain  person,  agreements  em- 
bracing an  entire  state  and  agreements  confined  to  a  certain 
territory,  where  such  territory  is  the  only  one  in  which  the  busi- 
ness may  be  carried  on,  have  been  held  invalid."  2  111.  Cyc. 
Dig.  658,  §  C,  and  cases  cited  in  notes.     The  authorities  agree 


THE  COMMON  LAW  235 

that  contracts  in  partial  restraint  of  trade,  in  order  to  be  valid, 
must  be  reasonable  as  to  time,  place,  terms,  etc.,  manifesting  an 
intention  to  simply  protect  the  party  relying  upon  the  covenant 
in  the  reasonable  restraint  of  unjust  discrimination  against  him. 
Such  contracts  usually  grow  out  of  sales  of  property  with  the 
good-will  of  a  business,  profession,  partnership,  etc.,  but  they  are 
not  confined  to  such  contracts.  Speaking  of  the  federal  statute 
in  the  well-considered  case  of  Whitwell  v.  Continental  Tobacco 
Co.,  60  C.  C.  A.  290,  64  L.  R.  A.  689,  it  is  said:  "If  it  [the 
contract]  promotes  or  accidentally  restrains  competition,  while 
its  main  purpose  and  chief  effect  are  to  foster  the  trade  and 
increase  the  business  of  those  who  made  and  operated  it,  then 
it  is  not  a  contract,  combination,  or  conspiracy  in  restraint  of 
trade  within  the  true  meaning  of  this  act,  and  is  not  subject  to 
its  denunciation." 

Are  the  foregoing  terms  of  the  contract  of  September  10, 
1901,  violative  of  the  law  under  the  rules  of  construction  above 
set  forth.  That  is,  are  the  restrictions  partial,  reasonable,  and 
calculated  to  foster  the  business  rather  than  to  destroy  com- 
petition ?  Looking  into  the  facts  and  circumstances  surrounding 
the  parties  at  the  time  the  contract  was  entered  into,  we  find 
that  Lanyon,  the  first  party,  possessed  a  large  tract  of  land  con- 
taining fire  clay  in  the  state  of  Indiana  which  was  undeveloped 
and  produced  no  adequate  income  as  compared  with  its  capabili- 
ties. He  had  the  money  to  develop  it  and  make  it  productive, 
but  was  without  experience  in  the  business  of  dealing  in  the 
product  and  without  means,  within  himself,  of  obtaining  a 
market  for  the  same.  Heber  and  Bonebrake  were  experienced 
miners  of  fire  clay,  and  in  a  small  way  engaged  in  the  business, 
which,  if  properly  extended,  would  make  Lanyon 's  property 
valuable.  The  appellee  corporations  had  for  many  years  been 
engaged  in  selling  the  product  and  were  looking  for  opportuni- 
ties to  increase  their  business.  Naturally  the  several  interests 
of  these  parties  drew  them  together  and  prompted  them  to  make 
the  contract  in  question.  It  was  of  mutual  benefit  and  advan- 
tage to  each  of  them.  Without  it  each  party  would  labor  at  a 
disadvantage  and  fail  to  realize  the  full  limit  of  his  or  its  re- 
sources and  opportunities.  The  contract  seems  just  and  reason- 
able in  the  light  of  these  facts.  The  corporations  might  reason- 
ably refuse  to  enter  into  the  contract  or  purchase  the  40  tons 


236    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  fire  clay  daily,  unless  they  could  be  protected  against  the 
selling  of  the  same  product  by  Lanyon  in  competition  with 
them.  The  contract  was  to  run  for  eight  years — a  time  not  un- 
reasonable for  the  development  of  the  business  entered  upon. 
The  limitation  applied  to  only  about  180  acres  of  land  in  a 
territory  of  many  hundreds  of  acres  underlaid  with  the  same 
fire  clay  deposits.  The  contract  in  no  way  sought  to  control 
the  labor  or  experience  of  all  or  any  considerable  number  of 
experienced  fire  clay  workers.  The  evidence  also  shows  that 
large  deposits  of  this  same  fire  clay  are  found  in  localities  out- 
side of  the  state  of  Indiana,  i.  e.,  in  Illinois,  Ohio,  Pennsylvania, 
and  perhaps  other  states.  Considering  the  contract  as  a  whole, 
in  the  light  of  the  facts  surrounding  the  parties,  we  are  of  the 
opinion  that  it  is  not  invalid,  that  the  object  of  it  was  to  foster 
and  establish  a  legitimate  business,  and,  although  to  a  limited 
extent  it  may  have  restrained  competition,  there  was  not  such  a 
limitation  or  restriction  as  should  defeat  its  validity  under  the 
law. 

It  needs  little  argument  to  show  that  the  case  is  clearly  dis- 
tinguishable from  that  of  Arnot  v.  Pittston  &  Elmira  Coal  Co., 
23  Am.  Rep.  190,  relied  upon  by  counsel  for  appellant  and  said 
by  them  to  be  absolutely  and  directly  in  point.  In  that  case, 
as  found  by  the  referee,  the  purpose  of  the  defendant  in  making 
the  contract  was  to  so  control  the  shipment  and  supply  of  coal 
for  the  Elmira  market  as  to  maintain  an  unnaturally  high  price 
of  coal  in  that  market  and  to  prevent  competition  in  the  sale  of 
coal  therein,  and  but  for  that  purpose  the  defendant  would  not 
have  entered  into  the  contract  with  the  Butler  Colliery  Com- 
pany. In  this  case,  as  we  understand  the  facts,  there  was  no 
such  purpose  or  intention  whatever.  That  case  is  distinguish- 
able from  this  in  other  material  facts.  [The  court  then  deals 
with  the  question  as  to  whether  the  contract  can  be  specifically 
enforced  in  equity  and  concludes  that  it  may  be.] 

"We  find  no  reversible  error,  and  the  judgment  of  the  Appel- 
late Court  will  be  affirmed. 

Judgment  affirmed. 


•-^    -Til  <irt  ^4 


THE  COMMON  LAW      '^      ^ '        237 

CHICAGO,  ST.  L.  &  N.  0.  R.  CO.  v.  PULLMAN  SOUTHERN  |^  ' 

CAR  CO.  t    vT" 


(Supreme  Court  of  United  States,  1891.     139  U.  S.  79.) 

MR.  JUSTICE  HARLAN  delivered  the  opinion  of  the  court: 
This  action  was  brought  by  the  Pullman  Southern  Car  Com- 
pany to  recover  from  the  Chicago,  St.  Louis  &  New  Orleans 
Railroad  Company  the  damages  alleged  to  have  been  sustained 
on  account  of  the  destruction  by  fire  of  two  of  the  plaintiff's 
sleeping  cars,  the  Great  Northern  and  the  Louisiana,  while  on 
the  premises  of  the  defendant.  There  was  a  verdict  and  judg- 
ment for  the  sum  of  $19,000,  with  interest  from  September  20, 
1886,  the  date  of  judicial  demand,  at  the  rate  of  5  per  cent  per 
annum  until  paid,  with  costs.  The  assignments  of  error  relate 
entirely  to  instructions  given  on  behalf  of  the  plaintiff,  and  to 
the  refusal  to  give  instructions  asked  by  the  defendant 

The  action  is  based  upon  a  written  agreement  between  these 
corporations,  dated  April  5,  1879,  showing  that  the  business  of 
the  plaintiff  was  to  operate  drawing-room  and  sleeping  cars 
which  it  hired,  under  written  contracts  for  a  term  of  years,  to 
be  used  and  employed  on  and  over  the  lines  of  railway  com- 
panies, receiving  therefor  income  and  revenue  by  the  sale  to 
passengers  of  seats,  berths,  and  accommodations  therein;  and 
that  the  defendant  was  desirous  of  availing  itself  of  their  use, 
on  its  own  routes,  and  also  of  connections,  by  means  of  such 
drawing-room  and  sleeping  cars,  with  other  railroads  over  which 
the  plaintiff  was  running  its  cars.  In  order  to  effect  the  objects 
of  the  parties  it  was,  among  other  things,  agreed  as  follows : 

(1)  The  plaintiff  was  to  furnish  drawing-room  and  sleeping 
cars  "sufficient  to  meet  the  requirements  of  travel,"  on  and 
over  the  defendant's  railway,  and  such  roads  as  the  latter  then 
or  thereafter  controlled  as  owner,  lessee,  or  otherwise;  the  cars 
so  furnished  to  be  satisfactory  to  the  general  manager  or  super- 
intendent of  the  railroad  company,  and  to  be  in  part  certain 
named  cars,  10  in  number,  among  which  were  the  Louisiana  and 
the  Great  Northern,  then  operated  on  the  defendant's  lines. 
(2)  Each  of  the  plaintiff's  cars  was  to  be  manned,  at  its  own 
cost,  by  one  or  more  of  its  employees,  as  might  be  needful  for 
the  collection  of  fares  and  the  comfort  of  passengers ;  such  em- 
ployees to  be  subject  to  the  rules  and  regulations  established 


\^^ 


238    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

by  the  defendant  for  its  own  employees.     (3)  "In  consideration 
of  the  use  of  the  aforesaid  cars,"  the  defendant  was  to  haul 
them  on  passenger  trains  on  its  ouai  lines  of  railroad,  and  on 
passenger  trains  on  which  it  might,  by  virtue  of  contracts  or 
running  arrangements  with  other  roads,  have  the  right  to  use 
them,   "in  such   manner  as  will  best   accommodate  passengers 
during  the  use  of  said  ears."     (4)  By  article  sixth  of  the  agree- 
ment, all  necessary  lubricating  material,  ice,  fuel,  and  material 
for  lights  were  to  be  supplied,  and  the  washing  and  cleansing  of 
the  cars  furnished  under  the  contract  to  be  done,  by  the  de- 
fendant at  its  expense,  which  should  also  renew  and  replace,  as 
often  as  necessary,  links,  pins,  bell-cord,  and  couplings  for  air- 
brake hose,  without  charge  to  the  plaintiff.     (5)   The  plaintiff 
was  to  keep  the  cars  furnislied  under  the  contract  in  good  order 
and  repair;  renew  and  improve  them,  when  necessary,  at  its 
own  expense;  keep  them  up  to  the  average  standard  of  the  best 
and  most  approved  sleeping  cars  on  any  road  using  an  equal 
number  of  cars,  "excepting  repairs  and  renewals  provided  for 
in  article  sixth  of  this  agreement,  and  such  as  are  made  neces- 
sary by  accident  or  casualty,  it  being  understood  that  the  rail- 
way company  shall  repair  all  damages  to  said  cars  of  every  kind 
occasioned  by  accident  or  casualty  during  the  continuance  of 
this  contract,  except  that  the  Pullman   Company  assumes  all 
responsibility  for  any  loss  or  damage  occurring  to  said  cars 
arising  from  defective  heating  apparatus  or  lights  furnished  by 
it"     (6)   As  proper  compensation  for  the  maintenance  of  the 
running  gear  and  bodies  of  the  cars,  the  defendant  was  to  pay 
plaintiff  "three  cents  per  car  per  mile  for  every  mile  run  by 
said  cars  upon  the  road  of  the  railway  company  or  upon  the 
roads  of  other  companies,  by  direction  of  the  officers  of  the  rail- 
way company,  while  in  service  under  this  contract ; ' '  and  at  all 
times,  when  requested  by  the  plaintiff,  to  make  promptly  such 
repairs  to  the  cars  furnished  under  the  contract  as  might  from 
time  to  time  become  necessary,  and,  without  request,  make  such 
repairs  as  were  required  "to  insure  their  safety,  rendering  bills 
monthly   to  the  Pullman   Company   for  repairs   to  cars,   and 
charging  for  the  same  only  the  actual  cost  of  material  and  labor 
expended  on  such  repairs,  with  an  addition  of  ten  per  cent  to 
cover  general  expenses,  all  settlements  and  payments  for  mile- 
age and  repairs  to  be  made  monthly  between  said  companies." 


THE  COMMON  LAW  239 

(7)  Whenever  the  revenue  from  sales  of  seats  and  berths 
equaled  an  average  of  $7,500  per  car  per  annum  upon  the  num- 
ber of  cars  furnished  under  the  contract,  then,  and  while  such 
revenue  continued,  the  defendant  should  not  pay  mileage  for 
any  car  so  furnished;  the  plaintiff,  in  such  case,  to  bear  the 
expense  of  all  repairs  and  improvements  to  its  cars,  "except 
such  repairs  as  are  rendered  necessary  by  accident  or  casualty, 
and  such  as  are  provided  for  in  article  sixth  of  this  agreement, 
which  shall  be  made  by  the  railway  company,  as  hereinbefore 
mentioned."  (8)  The  plaintiff_was  to  have  the  exclusive  right, 
for  a  term  of  15  years  from  the  date  of  the  agreementj  to  fur- 
nish drawing-room  and  sleeping  cars  for  the  defendant's  use  on 
all  its  passenger  trains  on  roads  then  or  subsequently  controlled 
or  owned  by  it,  and  on  roads  over  which  it  had  the  right  to  run 
such  cars;  the  defendant  not  to  "contract  with  any  otlier  party 
to  run  said  class  of  cars  on  and  over  said  lines  of  road  during 
said  period  of  fifteen  years."  (9)  In  case  either  party  failed  to 
cleanse  or  repair  any  of  the  cars,  according  to  the  conditions  of 
the  agreement,  and  the  party  so  in  default  should  neglect  and 
refuse  to  perform  its  agreement  in  this  respect  within  a  reason- 
able time  after  notice  of  such  default,  the  other  party  had  the 
right  to  cleanse  and  make  or  cause  to  be  made  all  necessary 
repairs  and  renewals  to  said  cars,  at  the  cost  of  the  party  in 
default.  (10)  If  either  party  failed,  at  any  time,  to  keep  and 
perform  its  covenants,  as  set  forth  in  the  agreement,  the  one  not 
in  default,  after  the  expiration  of  a  reasonable  time  from  the 
service  of  written  notice  of  such  default,  was  at  liberty  to  de- 
clare the  contract  at  an  end.  (11)  The  defendant  was  given 
the  option  to  terminate  the  contract  at  the  end  of  five,  eight,  or 
eleven  years,  upon  written  notice  to  the  plaintiff,  served  six 
months  before  the  day  fixed  for  such  termination;  and,  if  the 
contract  was  so  terminated,  without  default  upon  the  part  of 
the  plaintiff,  the  defendant  was  required  to  purchase  the  cars 
and  equipments  of  the  Pullman  Company  "then  in  use,  or  as- 
signed and  accepted  for  use,"  under  the  contract,  or  such  inter- 
est therein  as  the  defendant  may  not  have  previously  acquired 
under  the  provisions  of  this  contract,  "at  the  actual  cash  value 
of  the  same,"  with  the  right  to  use  them  without  charge  for 
patent-rights  for  their  interior  arrangements.  For  the  pur- 
poses of  the  option  given  to  terminate  the  contract,  it  was 


240    COMBINATIONS  ANIJ  RESTRAINT  OF  TRADE 

agreed  "that  the  cars  now  [then]  running  on  said  railroad,  and 
which  should  form  part  of  the  cars  and  equipments  to  be  fur- 
nished under  this  contract,  together  with  such  additional  cars 
and  equipments  as  may  hereafter  be  assigned  to  the  railway 
company,  shall  be  appraised,"  etc.  (12)  The  taxes  upon  all 
cars  furnished  to  the  defendant  by  the  plaintiff  were  to  be  paid 
equally  by  the  parties.     .     .     . 

3.  It  is  assigned  for  error  that  the  court  refused  to  instruct 
the  jury  that  the  agreement  sued  on  was  void,  as  against  public 
policy,  because  of  the  exclusive  rigiits  given  to  the  plaintiff  for 
the  term  of  fifteen  years  in  respect  to  drawing-room  and  sleep- 
ing cars  furnished  by  it  to  the  defendant,  supplemented  by  the 
stipulation  that  the  defendant  would  not  "contract  with  any 
other  party  to  run  the  said  class  of  cars  on  and  over  said  lines 
of  road  during  said  period  of  fifteen  years;"  and  because  the 
law  will  not  permit  individuals  to  oblige  themselves  by  a  con- 
tract, when  the  thing  to  be  done  or  omitted  is  injurious  to  the 
public.  Navigation  Co.  v.  Winsor,  20  Wall.  64,  66 ;  Chappel  v. 
Brockway,  21  Wend.  157,  159.  Such  a  contract,  it  is  argued, 
is  in  general  restraint  of  trade.  The  authorities  cited  in  support 
of  this  contention  have  no  application  to  such  a  contract  as  the 
one  before  us.  The  defendant  was  under  a  duty,  arising  from 
the  public  nature  of  its  employment,  to  furnish  for  the  use  of 
passengers  an  its  lines  such  accommodations  as  were  reasonably 
required  by  the  existing  conditions  of  passenger  traffic.  Its 
duty,  as  a  carrier  of  passengers,  was  to  make  suitable  provisions 
for  their  comfort  and  safety.  Instead  of  furnishing  its  own 
drawing-room  and  sleeping  cars,  as  it  might  have  done,  it  em- 
ployed the  plaintiff,  whose  special  business  was  to  provide  cars 
of  that  character,  to  supply  as  many  as  were  necessary  to  meet 
the  requirements  of  travel.  It  thus  used  the  instrumentality 
of  another  corporation  in  order  that  it  might  properly  discharge 
its  duty  to  the  public.  So  long  as  the  defendant's  lines  were 
supplied  with  the  requisite  number  of  drawing-room  and  sleep- 
ing cars,  it  was  a  matter  of  indifference  to  the  public  who  owned 
them.  Express  Cases,  117  U.  S.  1,  24,  25.  We  cannot  perceive  that 
such  a  contract  is  at  all  in  restraint  of  trade.  The  plaintiff  was 
at  liberty,  so  far  as  that  contract  was  concerned,  to  make  similar 
arrangements  for  the  accommodation  of  passengers  on  all  other 
railroads  in  the  country,  even  those  that  are  rivals  or  competi- 


THE  COIVIMON  LAW  241 

tors  in  business  with  the  defendant.  It  is,  however,  a  funda- 
mental condition  in  all  such  contracts  that  their  provisions  must 
not  be  injurious  to  the  public.  As  said  by  this  court  in  Cherokee 
Nation  v.  Eailway  Co.,  135  U.  S.  641,  657,  a  railroad  is  a  public 
highway,  established  primarily  for  the  convenience  of  the  people 
and  to  subserve  public  ends.  A  railroad  corporation  cannot, 
therefore,  without  the  sanction  of  the  government  creating  it, 
make  any  agreement  that  militates  against  the  public  conven- 
ience, or  that  will  defeat  the  public  objects  for  which  it  was 
established.  If  the  contract  in  suit  was  liable  to  objection  upon 
these  grounds,  a  different  question  would  be  presented  for  our 
determination.  But  we  are  of  opinion  that  public  policy  did 
not  forbid  the  railroad  company  from  employing  the  Pullman 
Southern  Car  Company  to  supply  drawing-room  and  sleeping 
cars  to  be  used  by  its  passengers,  and,  as  a  means  of  inducing 
the  plaintiff  to  perform  this  public  service  and  to  incur  the 
expense  and  hazard  incident  thereto,  from  giving  it  an  exclusive 
right  to  furnish  cars  for  that  purpose.  The  defendant  did  not, 
by  such  an  agreement,  abandon  the  duty  it  owed  to  the  public; 
for  the  ears  so  furnished,  while  in  its  possession  and  use,  be- 
came, as  between  it  and  its  passengers,  its  own  cars,  subject  to 
such  regulations  as  it  might  properly  establish  for  the  comfort 
and  safety  of  passengers  on  its  trains.  Pennsylvania  Co,  v.  Roy, 
102  U.  S.  451,  457,  And  the  contract  is  to  be  interpreted  in 
view  of  the  condition,  implied  by  law,  that  the  plaintiff  should 
furnish  cars  not  only  adequate  and  safe  but  sufficient  in  number 
for  the  use  of  the  public  desiring  to  travel  over  the  defendant's 
roads.  These  conditions  exist  independently  of  the  particular 
clause  giving  the  railroad  company  the  option  to  terminate  the 
agreement  at  the  end  of  five  or  eight  or  eleven  years.  Being 
imposed  by  law,  as  necessary  to  the  public  interests,  they  could 
not  be  dispensed  with  by  agreement  of  the  parties.  The  desig- 
nation of  particular  periods  of  time,  at  the  end  of  either  of 
which  the  defendant  might,  of  right  and  upon  notice,  terminate 
the  agreement,  did  not  tie  its  hands  so  that  it  could  not  con- 
tinuously discharge  its  duty  to  the  public  in  respect  to  the 
adequacy  or  safety  of  cars  in  which  it  conveyed  passengers.  The 
stipulation,  therefore,  that  the  plaintiff,  not  being  in  default, 
should  have  the  exclusive  right  for  15  years  to  furnish  drawing- 
room  and  sleeping  ears  for  the  defendant's  use,  and  that  the 

Kales  R.  of  T.  Vol.  1—16 


/' 


242    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

defendant  should  not,  during  that  period,  contract  for  cars  of 
that  kind  with  any  other  party,  rightly  construed,  is  not  unrea- 
sonable, and,  properly  performed,  will  promote  the  convenience 
of  the  public,  in  that  it  enables  the  defendant  to  have  on  its 
lines,  at  all  times,  and  as  the  requirements  of  travel  demand, 
drawing-room  and  sleeping  cars  for  use  by  passengers.  It  is  a 
stipulation  that  does  not  interfere  in  any  degree  with  its  right 
and  duty  to  disregard  the  contract  whenever  the  plaintiff  fails  in 
furnishing  cars  that  are  adequately  safe  and  sufficient  in  num- 
ber for  the  travel  on  defendant's  lines.  The  suggestion  that 
the  agreement  is  void,  upon  grounds  of  public  policy,  or  because 
it  is  in  general  restraint  of  trade,  cannot,  for  the  reasons  stated, 
be  sustained.  [Remainder  of  the  opinion  is  omitted.  On  other 
grounds  the  judgment  w^as  reversed  and  the  cause  remanded 
for  a  new  trial  in  conformity  with  the  opinion.] 


(V^ 


/C 


0^ 

^^    UNION  TRUST  &  SAVINGS  BANK  v.  KINLOCH  LONG- 
^  DISTANCE  TEL.  CO. 

r^^  (Supreme  Court  of  Illinois,  1913.     258  111.  202.) 

\^^       '  DUNN,  C.  J.    The  Farmers'  &  Merchants'  Bank  of  Vandalia, 
A    ^^^    as  the  owner  of  certain  bonds  of  the  Vandalia  Telephone  Com- 
^         ,.    pany,  and  the  Union  Trust  &  Savings  Bank  of  East  St.  Louis, 
■♦•'■^     as  the  trustee  in  a  trust  deed  securing  such  bonds,  filed  a  bill  to 
^i>^'^\  foreclose  the  trust  deed,  which  was  dated  June  1,  1907,  and 

^  ^^  ,     conveyed  the  telephone  exchange,  switchboard,  poles,  wires,  in- 
•-*^      struments,  and  all  property  of  every  description  of  the  Vandalia 
'•^,     Telephone   Company.      The   Kinloch   Long-Distance   Telephone 
^/K^    ^    Company  of  Missouri  was  made  a  defendant  upon  the  allegation 
»•        \A      that  it  claimed  some  interest  in  the  premises,  and  it  answered, 
^<^     J    setting  up  its  interest.     The  cause  was  heard  on  the  bill,  the 
V*         separate  answers  of  the  defendants,  replication,  and  evidence, 
r^  and  a  decree  of  foreclosure  was  rendered  finding  that  the  Kin- 

loch Company  had  no  lien  on  or  interest  in  the  property.    The 
^t.  Appellate  Court  for  the  Fourth  District  affirmed  the  decree  and 

granted  a  certificate  of  importance  and  appeal  to  the  Kinloch 
Company  alone.  No  question  is  made  as  to  the  foreclosure,  but 
only  as  to  the  validity  and  effect  of  the  contract  hereafter  men- 


THE  COIVUVION  LAW  243 

tioned  between  the  long-distance  and  the  telephone  companies, 
by  which  names  the  telephone  companies  designated  themselves, 
and  will  hereafter  be  called. 

The  telephone  company  is  an  Illinois  corporation,  authorized 
to  construct,  maintain,  and  operate  a  telephone  system  and  do  a 
general  telephone  business,  and  in  April,  1906,  was  constructing 
and  intending  to  operate  a  telephone  exchange  in  the  city  of 
Vandalia  and  lines  reaching  other  places  in  Fayette  county. 
The  long-distance  company  is  a  Missouri  corporation,  authorized 
by  its  charter  to  construct,  own,  operate,  and  maintain  local  ex- 
changes and  long-distance  telephone  lines  throughout  the  states 
of  Missouri  and  Illinois,  and  also  authorized,  by  having  com- 
plied with  the  laws  of  this  state,  to  exercise  here  the  rights  and 
privileges  granted  to  foreign  corporations.  These  corporations 
on  April  27,  1906,  entered  into  a  contract  whereby  the  long- 
distance company  granted  to  the  telephone  company  a  license 
to  attach  cross-arms  to  12  poles  of  the  long-distance  company 
in  the  city  of  Vandalia,  and  the  telephone  company  granted  a 
license  to  the  long-distance  company  to  connect  its  telephone 
system  with  that  of  the  telephone  company  through  its  switch- 
boards, so  that  there  could  be  an  interchange  of  business,  at  all 
times  between  the  parties,  the  license  thus  granted  to  be  irrev- 
ocable during  the  existence  of  the  agreement,  and  the  agree- 
ment to  remain  in  force  during  the  life  of  the  telephone 
company's  franchise  to  operate  in  the  city  of  Vandalia  and 
during  any  renewals  or  extensions  thereof.  Other  material 
provisions  of  the  contract  are  as  follows: 

' '  Fourth.  No  connection  with  any  other  line  or  lines,  except 
those  actually  owned,  controlled  and  operated  by  the  telephone 
company,  is  contemplated  or  intended  by  the  long-distance  com- 
pany in  this  agreement,  and  no  connection  with  any  other  line 
will  be  given,  or  allowed  to  be  given,  by  the  telephone  company 
to  the  long-distance  company's  lines,  under  penalty  of  forfeiture 
of  the  rights  herein  contained,  unless  special  agreement  in  writ- 
ing is  entered  into  between  the  parties  hereto  and  the  third 
parties  who  desire  to  connect  to  the  long-distance  company's 
system  through  the  telephone  company's  lines,  in  which  agree- 
ment the  telephone  company  becomes  responsible  to  the  long- 
distance company  for  every  message  delivered  to  the  long-dis- 
tance company's  lines  by  the  third  parties,  and  makes  said 


244    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

parties'  lines  in  every  other  respect  a  part  of  its  own  system  and 
bound  by  the  terms  and  conditions  of  this  agreement.  Nothing 
in  this  section,  however,  shall  be  construed  to  prevent  the  long- 
distance company  from  connecting  with  other  companies  and 
exchanges  at  points  outside  of  said  city  of  Vandalia. 

' '  Fifth.  The  telephone  company  agrees  to  deliver  to  the  long- 
distance company  all  messages  originating  on  its  own  line  or 
exchange  and  which  terminate  at  points  reached  by  the  long- 
distance company  or  its  connecting  lines,  and  the  long-distance 
company  agrees  to  deliver  to  the  telephone  company  all  mes- 
sages it  receives  which  terminate  at  points  reached  by  the  tele- 
phone company  in  the  county  of  Fayette,  aforesaid.  If  the  lines 
of  the  telephone  company  reach  points  outside  of  said  county  of 
Fayette,  which  points  are  also  reached  by  other  'independent' 
or  'opposition'  lines,  the  long-distance  company  hereby  agrees 
to  distribute  the  business  destined  for  such  common  point  as 
equally  as  practicable  between  the  telephone  company  and  such 
other  'independent'  or  ' opposition^?  line  or  lines,  but  the  long- 
distance company  reserves  the  right  to  transmit  all  business  to 
such  common  point  Over  such  line  or  lines  as  will  enable  it  to 
render  the  best  service." 

"Twelfth.  The  telephMie  company  shall  not  sell  or  lease  any 
of  its  wires  or  exchanges  to  any  telephone  company,  or  to  any 
corporation  or  individual  whatsoever,  so  as  to  impair  the  pro- 
visions of  this  contract,  without  the  consent  of  the  long-distance 
company;  nor  have  the  right  to  connect  or  exchange  business 
with  any  company  at  or  for  points  reached  by  the  long-distance 
company  or  its  connecting  lines;  nor  have  the  right  to  do  any- 
thing which  will  in  any  manner  impair  the  obligations  of  this 
contract  or  impair  the  efficiency  of  the  long-distance  business  or 
its  connection  with  the  long-distance  company." 

The  answer  of  the  long-distance  company,  after  setting  up 
this  contract,  alleged  that  it  was  operating  lines  for  long-distance 
telephone  service  reaching  numerous  cities,  towns  and  villages 
of  the  states  of  Illinois,  Missouri,  Kansas,  Indiana,  Ohio  and 
Kentucky ;  that  the  service  of  the  telephone  company  was  limited 
to  the  city  of  Vandalia  and  the  county  of  Fayette;  that  there 
was  no  competition  between  the  two  companies,  but  the  contract 
was  entered  into  to  enable  the  telephone  company  to  furnish  to 
its  subscribers  and  to  the  public  long-distance  telephone  service ; 


THE  COMMON  LAW  245 

that  the  parties  to  the  contract  assumed  a  greater  public  duty 
than  either  could  have  assumed  without  the  aid  of  the  other, 
and  that  they  have  operated  in  competition  with  the  Bell  tele- 
phone system  and  have  furnished  long-distance  telephone  service 
at  reasonable  rates ;  that  at  the  time  the  trust  deed  was  executed 
the  contract  was  in  force,  both  parties  were  carrying  it  out  and 
were  mutually  using  the  property  of  one  another  in  doing  so, 
the  appellees  had  full  knowledge  of  these  facts,  and  for  that 
reason  the  long-distance  company  had  an  interest  in  the  property 
which  was  not  subject  to  the  lien  of  the  trust  deed.  Upon  excep- 
tion by  the  appellees  all  the  allegations  in  the  answer  having 
any  reference  to  the  contract  were  stricken  out  as  impertinent. 

It  is  manifest  from  the  terms  of  the  contract  that  its  object"! 
was  to  restrict  long-distance  telephone  service,  so  far  as  the  city 
of  Vandalia  and  Fayette  county  were  concerned,  to  the  Kinloch 
Company.  The  patrons  of  the  telephone  company  were  deprived 
of  the  opportunity  of  communication  with  persons  in  distant 
cities  except  over  the  Kinloch  lines,  though  such  persons  had 
telephones  connected  with  another  company's  lines  running  to 
Vandalia,  and  the  telephone  company  contracted  not  to  give 
them  this  opportunity  so  long  as  it  was  engaged  in  the  telephone 
business  in  Vandalia.  The  contract  was  adapted  to  secure  a 
monopoly  of  tlie  business  to  the  Kinloch  Company,  and  was 
entered  into  for  that  purpose.  By  it  the  telephone  company 
deprived  itself  of  the  power  to  render  to  the  public  a  part  of 
the  service  which  it  was  organized  to  render.  Combinations 
and  contracts  of  corporations  and  of  individuals  having  for  their 
object  the  restraint  of  trade,  the  destruction  of  competition, 
the  creation  of  a  monopoly,  and  the  raising  of  prices  are  unlaw- 
ful, even  though  they  violate  no  statute.  The  contract  is  in 
restraint  of  trade  and  commerce,  and  is  therefore  void  unless 
the  circumstances  of  the  particular  case  exempt  it  from  the 
general  rule. 

The  rule  that  at  common  law  contracts  in  general  restraint 
of  trade  are  illegal  and  void  is  well  settled,  but  agreements  in 
partial  restraint  of  trade  only  may  be  good  under  certain  cir- 
cumstances if  reasonable  in  their  nature,  and  made  upon  a  suffi- 
cient consideration.  The  cases  in  which  such  contracts  in  par- 
tial restraint  of  trade  have  been  regarded  as  reasonable  have 
;usually  been  cases  in  which  the  vendor  of  property  or  business 


246    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

has  been  restricted  in  its  use  so  as  not  to  injure  the  vendee,  or 
the  vendee  has  been  restricted  so  as  not  to  injure  the  business 
of  the  vendor,  or  a  partner  or  employee  has  been  restrained 
from  competition  with  the  partnership  or  employer  to  the  injury 
of  the  business.  In  all  cases  the  restraint  of  trade  has  been 
auxiliary  to  the  main  purpose  of  the  contract,  and  has  been 
necessary  to  protect  one  party  from  injury  by  the  unfair  use 
of  the  subject-matter  of  the  contract  by  the  other  party.  More 
v.  Bennett,  140  111.  69,  15  L.  R.  A.  361,  33  Am.  St.  Rep.  216; 
Oregon  Steam  Navigation  Co.  v.  Winsor,  20  Wall.  64,  22  L.  Ed. 
315.  The  ordinary  rule  that  contracts  in  partial  restraint  of 
trade  are  not  invalid  does  not,  however,  apply  to  corporations 
engaged  in  a  public  business  in  which  all  the  public  are  interested. 
Whatever  tends  to  prevent  competition  between  them  or  to 
create  a  monopoly  is  unlawful.  Chicago  Gaslight  Co.  v.  Peo- 
ple's Gaslight  Co.,  121  111.  530,  2  Am.  St.  Rep.  124;  People  v. 
Chicago  Gas  Trust  Co.,  130  111.  268,  8  L.  R.  A.  497,  17  Am.  St. 
Rep.  319.  The  business  of  such  corporations  is  public  in  its 
nature,  and  is  the  exercise  of  a  franchise  granted  by  the  state, 
not  for  the  private  benefit  of  the  corporation,  only,  but  for  the 
benefit  of  the  public  as  well.  A  corporation  receiving  such  a 
grant  owes  a  duty  to  the  public,  and  it  cannot,  without  the  con- 
sent of  the  state,  disable  itself  from  performing  any  part  of  the 
functions  which  its  charter  authorizes  it  to  perform.  A  contract 
to  do  so  is  a  violation  of  its  duty  to  the  state  and  is  void,  as 
against  public  policy.  Chicago  Gaslight  Co.  v.  People 's  Gaslight 
Co.,  supra;  People  v.  Chicago  Gas  Trust  Co.,  supra;  South  Chi- 
cago City  Railway  Co.  v.  Calumet  Street  Railway  Co.,  171  111. 
391 ;  Thomas  v.  West  Jersey  Railroad  Co.,  101  U.  S.  71,  25  L. 
Ed.  950 ;  Gibbs  v.  Consolidated  Gas  Co.,  130  U.  S.  396,  32  L. 
Ed.  979. 

The  duty  of  the  corporations  to  use  their  franchises  for  the 
public  interest  cannot  be  restrained  by  contract,  and  it  is  no 
justification  for  an  agreement  which  tends  to  prevent  the  dis- 
charge of  that  duty  that  the  telephone  company  was  not  under 
an  express  duty  to  give  long-distance  telephone  service  to  the 
public.  It  was  a  public  service  corporation  which  had  the  power, 
by  virtue  of  the  franchise  granted  it  by  the  state,  to  extend  its 
lines  when  and  where  the  interests  of  the  public  and  its  own 
interest  demanded.    It  is  argued  that  the  effect  of  the  contract 


THE  COMJVION  LAW  247 

was  to  create  competition,  and  not  to  destroy  it.    It  is  said  that 
the  Bell  system  had  a  local  exchange  at  Vandalia,  connecting 
with  its  long-distance  lines,  when  the  Vandalia  Telephone  Com- 
pany was  organized  in  1906,  and  that  the  effect  of  the  contract 
with  the  Kinloch  Company  was  to  enable  the  telephone  company 
to   increase   its   service   by   giving   long-distance    connections 
and    to    give    the    public    at    Vandalia    two    local    and    two 
long-distance  telephone  systems.     It  is  not  the  effect  of  the" 
contract    that    there    are    two    long-distance    telephone    lines'; 
in  Vandalia.     Without  the   contract  the  telephone  company 
would  be  at  liberty  to  contract  with  both  the  Kinloch  and  Bell 
systems  for  long-distance  connections.     Under  such  contracts 
the   patrons   of  the   telephone   company   could   be   connected 
directly  with  any  telephone  on  either  system,  and  the  patrons 
of  either  system  in  distant  cities  could  be  connected  directly 
with  patrons  of  the  telephone  company.     Such  service,  how- 
ever desirable,  is  now  impossible.    It  will  continue  to  be  im- 
possible, unless  contracts  can  be  made  with  both  long-distance 
companies.    These  contracts  cannot  be  compelled,  but  none  of 
the  corporations  can  by  any  contract  deprive  themselves  of 
the  power  to  make  them.    It  may  be  that  the  telephone  com- 
pany cannot  be  compelled  to  give  long-distance  service  or  to 
connect  its  exchange  with  any  other  system,  or,  having  con- 
nected with  one  system,  to  permit  a  connection  with  another. 
It  may  decline  to  undertake  any  service  which  cannot  be  be- 
gun and  completed  over  its  own  lines.     If  it  does  undertake 
such  service  it  may  select  its  own  lines  and  it  may  confine  it- 
self to  one  agent,  but  it  may  not  bind  itself  to  do  so  and  con- 
tract away  its  right  and  power  to  use  more  than  one  agency, 
and  thus  limit  its  power  to  serve  the  public  to  that  part  of  the 
public  reached  by  the  one  agency.     The  object  of  telephone 
systems  is  to  enable  individuals  to  talk  to  one  another  at  dis- 
tances too  great  for  ordinary  conversation.    A  line  connecting 
two  cities  with  a  single  instrument  at  each  end  would  be  of 
comparatively  little  use.      It  is  the  possibility   of  connection 
with  a  large  number  of  instruments  that  gives  usefulness  to 
the  system.     The  use  of  the  telephone  has  come  to  be  quite 
generally  regarded  not  as  a  luxury  or  convenience,  but  a  neces- 
sity, and  it  is  essential  to  the  greatest  public  convenience  that 
all  users  of  telephones  should  be  able  to  secure,  as  nearly  as 


248    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

possible,  direct  connection  with  all  other  users.  This  perfec- 
tion of  service  is  not  now  possible,  but  a  telephone  company  is 
avoiding  the  performance  of  its  duty  to  the  public  when  it 
contracts  to  restrict  its  field  of  operations  to  communications 
to  and  from  the  patrons  of  one  long-distance  line.  Any  con- 
tract thus  to  deprive  itself  of  the  power  to  render  to  the  public 
that  service  which  it  was  incorporated  to  give  is  violative  of 
the  public  right.  The  language  used  in  South  Chicago  City 
Railway  Co.  v.  Calumet  Street  Railway  Co.,  supra,  is  applicable 
here :  "To  say  the  defendant  was  not  bound  to  extend  its 
lines,  though  it  might  be  necessary  to  do  so  to  serve  the  public 
convenience  is  one  thing;  but  to  say  that  it  shall  not  do  so 
because  of  the  binding  force  of  its  contract  with  an  individual 
or  corporation  is  quite  another  and  very  different  thing." 

If  neither  of  the  long-distance  companies  at  Vandalia  would 
contract  with  the  telephone  company  for  long-distance  service 
without  an  exclusive  clause  in  the  contract,  the  latter  had  still 
the  right  to  construct  its  own  long-distance  lines  and  the  long- 
distance companies  the  right  to  establish  local  exchanges.  A 
general  interchange  of  business  among  all  the  companies 
would  be  more  beneficial  to  the  public.  While  this  cannot  be 
compelled,  it  cannot  be  said  that  competition  would  be  in- 
creased by  the  combination  of  two  of  the  systems  through  an 
exclusive  contract  for  the  interchange  of  business.  While  no 
statute  has  been  enacted  declaring  such  exclusive  contracts 
criminal  or  giving  a  right  of  action  to  persons  prejudiced  by 
them,  the  courts  have  declared  the  public  policy  of  the  state,  in 
accordance  with  the  common  law,  to  be  opposed  to  such  con- 
tracts which  tend  to  put  the  power  to  render  public  service  in 
the  hands  of  one ,  corporation  and  to  take  it  away  from  all 
others.  The  legislature  has  the  power  to  change  this  policy. 
It  is  a  legislative  question  whether  the  public  interest  will  be 
promoted  by  monopolistic  rather  than  competitive  service.  In 
the  absence  of  legislative  action,  the  contract  in  controversy 
must  be  held  to  be  illegal  and  void. 

The  Supreme  Court  of  Missouri  has  held  a  contract  for  the 
exclusive  interchange  of  business  very  similar  to  the  one  now 
under  consideration  to  be  for  the  purpose  of  competition  and 
not  of  monopoly.  Home  Telephone  Co.  v.  Sarcoxie  Light  & 
Telephone  Co.,  236  Mo.  114,  36  L.  R.  A.  (N.  S.)  124.    It  was  so 


THE  COMMON  LAW  249 

held  in  Cumberland  Telephone  &  Telegraph  Co.  v.  State,  100 
Miss.  102,  54  South.  670,  39  L.  R.  A.  (N.  S.)  277.  The  opposite 
view  is  sustained  by  the  ease  of  United  States  Telephone  Co. 
V.  Central  Union  Telephone  Co.  (C.  C.)  171  Fed.  130;  same 
case  on  appeal  (C.  C.  A.)  202  Fed.  66;  and  to  some  extent  by 
State  V.  Cadwallader,  172  Ind.  619;  and  Central  New  York 
Telephone  &  Telegraph  Co.  v.  Averill,  199  N.  Y.  128,28  32  L. 
R.  A.  (N.  S.)  494,  139  Am.  St.  Rep.  878.  Such  contracts  can 
be  regarded  as  favoring  competition  only  on  the  theory  that 
they  are  necessary  to  enable  a  weaker  competitor  to  contend 
against  one  stronger  and  already  established.  This  might  be 
the  effect  for  a  time ;  but,  when  by  exclusive  contracts  control 
of  territory  had  been  secured,  then  by  new  contracts  and  com- 
binations all  competition  could  be  eliminated,  and  the  last  state 
of  that  community  would  be  worse  than  the  first.  It  is  not  an 
answer  to  say  that  the  effect  of  the  contract  has  not  been  to 
destroy  competition,  that  competition  still  exists,  and  that  the 
service  is  rendered  at  reasonable  prices.  The  material  con- 
sideration is,  not  that  the  effect  of  the  contract  has  been  to 
raise  prices,  but  that  the  power  exists  to  do  so ;  not  the  degree 
of  injury  inflicted  on  the  public,  but  the  tendency  to  inflict 
injury.    Harding  v.  American  Glucose  Co.,  182  111.  551,  64  L. 

28— In  this  case  it  was  held  that  a  who  happen  to  be  served  by  a  rival 
private  subscriber's  contract  which  company.  It  is  true  that  the  cus- 
contained  a  clause  that  the  instru-  tomers  who  had  voluntarUy  entered 
ments  used  by  such  subscriber  "are  into  the  agreement  of  exclusion 
not  to  be  connected  with  or  used  in  would  have  no  just  ground  of  com- 
connection  with  any  exchange,  office  plaint  themselves;  but  how  about 
or  telephone,  except  those  of  the  the  customers  of  the  rival  company 
first  party,  or  its  connections,  and  who  are  thereby  shut  out  from 
only  by  lines  connecting  said  switch-  communication  by  telephone  with 
board  with  the  company's  office  and  their  neighbors?  They  are  not  par- 
switchboard  as  within  provided,"  ties  to  the  contract  and  yet  they 
was  illegal.  The  court  said,  p.  138 :  suffer  its  consequences,  although 
' '  The  evil  in  such  an  agreement  is  they  constitute  a  portion  of  the  pub- 
its  antagonism  to  the  interests  of  lie  for  whose  benefit  the  franchise 
the  public.  If  a  telephone  company  was  granted  to  the  corporation 
may  make  a  contract  of  exclusion  whose  action  deprives  them  of  the 
with  one  of  its  customers  it  may  more  extended  telephone  service 
make  such  a  contract  with  all — and  which  otherwise  they  might  enjoy." 
thus  preclude  all  from  any  tele-  On  p.  139,  the  court  said:  "To 
phonic  communication  with  persons  recapitulate  the  reasons  which  lead 


250    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

R.  A.  738,  74  Am.  St.  Rep.  189 ;  Salt  Co.  v.  Guthrie,  35  Ohio  St. 
666 ;  State  v.  Standard  Oil  Co.,  49  Ohio  St.  137,  15  L.  R.  A.  145, 
34  Am.  St.  Hep.  541 ;  State  v.  Portland  Natural  Gas  Co.,  15a 
Ind.  483,  53  L.  R.  A.  413,  74  Am.  St.  Rep.  314. 

Cases  have  been  cited  involving  the  contracts  of  railroad 
companies  for  the  exclusive  use  of  sleeping  cars,  express  cars, 
wharves,  and  docks.  The  character  of  such  contracts  is  essen- 
tially different  from  that  involved  here.  The  nature  of  the 
use  to  be  made  of  the  property,  the  character  of  the  service 
to  be  rendered,  the  agents  to  be  employed  and  the  agencies  to 
be  maintained,  were  such  as  would  interfere  materially  with 
the  railroad  company's  control  of  its  own  business  if  the  busi- 
ness provided  for  in  such  contracts  were  to  be  free  to  all  appli- 
cants. The  same  difficulty  does  not  exist  in  regard  to  the 
telephone  service,  in  which  it  is  entirely  practicable  to  take  on 
long-distance  connections  with  many  companies,  and  the  cases 
cited  have  therefore  little  analogy  here. 

The  judgment  of  the  Appellate  Court  is  affirmed. 

Judgment  affirmed. 

to  the  conclusion  that  this  contract  all  the  patrons  of  that  other  tele- 
(the  exclusive  clause)  is  injurious  phone  service  from  telephonic  com- 
to  the  public  interest  generally,  the  munication  with  such  subscriber  and 
argument  may  be  simply  stated.  The  all  the  occupants  of  his  premises, 
public  franchises  which  telephone  Though  the  number  affected  by  one 
corporations  enjoy  are  granted  to  such  exclusive  contract  may  not  be 
promote  the  transmission  of  vocal  large,  if  exclusion  may  be  exacted 
messages  between  the  largest  num-  from  one  customer  it  may  be  exacted 
bers  of  persona  who  can  be  brought  from  all,  and  so  a  corporation  first 
into  communication  with  one  an-  in  the  field  might  establish  a  mo- 
other  under  satisfactory  economic  nopoly  to  the  detriment  of  a  large 
conditions.  This  purpose  is  frus-  proportion  of  the  community  and 
trated  by  any  agreement  which  op-  their  deprivation  of  telephonic  inter- 
erates  to  prevent  the  rendition  of  communication.  This  illustration 
telephone  service  where  otherwise  it  serves  to  show  the  danger  to  the 
could  be  obtained.  A  contract  be-  public  which  would  arise  from  per- 
tween  a  telephone  corporation  and  mitting  any  such  exclusive  contracts 
one  of  its  subscribers  whereby  the  at  all.  The  validity  of  a  single  one 
latter  excludes  all  other  telephone  cannot  be  recogni5;ed  without  peril 
service  from   his  premises   deprives  to  the  public  interest." 


THE  COMMON  LAW^     ^'  ^^i*      251 
Section  4  V'^'^      W"^ 


GONTEACTS  ON  THE  PAET  OF  BUYERS  TO  KEEP  UP  THE  PRICE 

ON  RE -SALE 

GROGAN  V.  CHAFFEE 
(Supreme  Court  of  California,  1909.     156  Cal.  611.) 

THE  COURT  PER  CURIAM.  A  judgment  of  reversal  hav- 
ing been  heretofore  rendered  herein,  a  rehearing  was  ordered. 
The  opinion  originally  filed  was  prepared  by  Sloss,  J.,  and 
read,  in  part,  as  follows: 

"The  plaintiff  appeals  from  a  judgment  against  him,  fol- 
lowing an  order  sustaining  a  demurrer  to  his  amended  com- 
plaint. The  demurrer  is  based  upon  both  general  and  special 
grounds.  On  this  appeal,  however,  the  respondent  limits  his 
argument  in  support  of  the  ruling  on  the  demurrer  to  the 
ground  that  the  complaint  fails  to  state  facts  sufficient  to  con- 
stitute a  cause  of  action.  We  are  satisfied  that  there  is  no 
merit  in  any  of  the  other  specifications,  and  shall  address  our- 
selves to  the  single  proposition  discussed  by  counsel. 

"The  case  stated  by  the  complaint  is  this:  The  plaintiff  has 
for  10  years  been  engaged  in  the  manufacture  and  production 
of  pure  olive  oil  by  a  process  of  his  own  discovery.  The  oil  so 
produced  is  sold  and  used  for  food,  medical  and  commercial 
purposes,  and  plaintiff  has  extensively  advertised  to  the  public 
the  fact  that  he  manufactures  a  pure  olive  oil,  and  that  such 
oil  is  guaranteed  to  be  pure  and  wholesome.  In  his  advertising 
the  plaintiff  has  used  certain  designs  copyrighted  by  him,  and 
these  designs  are  placed  on  every  bottle  or  package  of  oil 
manufactured  and  sold  by  him,  as  a  trade-mark.  By  reason 
of  these  methods  of  advertising  and  dealing,  the  plaintiff's  oil 
has  become  well  known,  and  a  large  quantity  thereof  is  sold 
throughout  the  United  States,  and  more  particularly  in  the 
city  of  Pasadena,  and  elsewhere  in  the  county  of  Los  Angeles.  IIMaA*- 
The  plaintiff  has  affixed  to  every  bottle  or  package  of  his  oil  i^^^. 
a  notice  stating  that  the  article  'is  sold  upon  the  condition  that  "^ 
the  purchaser,  if  he  retails  these  goods,  will  maintain  my  fixed 
retail  selling  price  on  them;  and  that,  if  he  wholesales  them, 
he  will  sell  them  subject  to  this  same  condition.'  This  notice 
specifies  the  fixed  retail  selling  price  as  $1.35  per  half  gallon 


h' 


252    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

can  and  $2.50  per  gallon  can.  All  persons  buying  said  olive 
oil  agree  not  to  sell  or  deliver  any  of  it  at  a  price  less  than  that 
provided  for  in  the  notice. 

"The  defendant  is  a  retail  grocer,  engaged  in  business  in 
the  city  of  Pasadena.  He  has  bought  of  plaintiff  olive  oil  un-_ 
der  the  express  contract  and  condition  that  the  same  should 
not  be  sold  at  a  price  or  prices  less  than  those  fixed  by  plaintiff. 
He  has,  however,  refused  to  comply  with  his  contract,  and 
sells  and  offers  for  sale  said  oil  at  the  price  of  $1.20  per  half 
gallon,  and  has  advertised  such  offer  by  publication  in  a  news- 
paper and  by  posters  and  notices  posted  in  the  windows  of 
his  store.  This  conduct  has  been  continued  by  defendant  not- 
withstanding plaintiff's  demand  that  he  comply  with  his  contract. 
The  complaint  alleges  that  plaintiff  has  sustained  irreparable 
damage,  that  it  is  impossible  to  ascertain  the  damage  sus- 
tained and  to  be  sustained,  and  that  there  is  no  adequate 
remedy  at  law.  The  prayer  is  for  an  injunction  restraining 
defendant  from  advertising,  selling,  or  offering  for  sale  the  oil 
at  prices  less  than  those  fixed  by  the  contract,  and  for  damages. 

' '  In  support  of  the  ruling  sustaining  the  demurrer  it  is  urged 
that  the  contract  relied  on  by  plaintiff  is  unenforceable  as 
being  in  restraint  of  trade. 

"We  have  here  no  question  of  an  attempted  monopoly.  'A 
monopoly  exists  where  all,  or  so  nearly  all,  of  an  article  of 
trade  or  commerce  within  a  community  or  district,  is  brought 
within  the  hands  of  one  man  or  set  of  men,  as  to  practically 
bring  the  handling  or  production  of  the  commodity  or  thing 
within  such  control  to  the  exclusion  of  competition  of  free 
traffic  therein.  Herriman  v.  Menzies,  115  Cal.  16,  35  L.  R.  A. 
318,  56  Am.  St.  Rep.  81.  It  was  the  tendency  to  create  a 
monopoly,  thus  defined,  that  was  the  objectionable  feature  of 
the  agreements  declared  invalid  in  such  cases  as  Pacific  Factor 
Co.  V.  Adler,  90  Cal.  117,  25  Am.  St.  Rep.  102 ;  Mill,  etc.,  Co.  v. 
Hayes,  76  Cal.  387,  9  Am.  St.  Rep.  211 ;  Vulcan  Powder  Co.  v. 
Hercules  Powder  Co.,  96  Cal.  510,  31  Am.  St.  Rep.  242.  See, 
also,  Cummings  v.  Union  Blue  Stone  Co.,  164  N.  Y.  1,  79  Am. 
St.  Rep.  620;  Cohen  v.  Envelope  Co.,  166  N.  Y.  292.  The  con- 
tract here  relied  on  does  not  relate  to  any  olive  oil  except  that 
manufactured  by  plaintiff.  There  is  no  suggestion  that  this 
comprises  all,  or  any  large  proportion,  of  the  olive  oil  manu- 


THE  COMMON  LAW  253 

factured  or  sold  in  the  market  supplied  by  plaintiff.  While 
plaintiff  alleges  that  he  manufactures  oil  by  a  process  of  his 
own  discovery,  there  is  nothing  exclusive  in  the  product  result- 
ing from  this  process.  All  that  he  claims  for  his  oil  is  that  it 
is  pure  and  wholesome.  The  court  must  assume,  as  a  matter 
of  common  knowledge,  that  others  may  and  do  manufacture 
pure  olive  oil  in  considerable  quantities. 

"Under  these  circumstances  we  see  no  reason  why  the  con- 
tract alleged  by  plaintiff  should  not,  as  between  the  parties 
to  it,  be  held  to  be  valid.    It  violates  no  canon  of  public  policy. 
By  its  terms  the  buyer  is  not  precluded  from  engaging  in  any 
lawful  trade.    He  may  sell  other  olive  oil  at  any  price  and  on 
any  conditions  satisfactory  to  him.     The  producer  was,  in  the 
first_  instance,  under  no  obligation  to  sell  his  oil,  and  when  he 
did~sell  it  had  the  right  to  exact,  as  part  of  the  consideration 
for  the  sale,  a  promise  by  the  purchaser  that  he  would  not  sell 
it  at  less  than  a  stipulated  price.    There  is  nothing  either  un- 
reasonable or  unlawful  in  the   effort  by  a  manufacturer  to 
maintain  a  standard  price  for  his  goods.    It  is  simply  a  means 
of  securing  the  legitimate  benefits  of  the  reputation  which  his 
product  may  have  attained.    Contracts  similar  to  the  one  under 
discussion  have  been  considered  in  a  number  of  cases,  and  have 
generally  been  upheld  where,  as  here,  they  had  no  tendency 
to  create  a  monopoly.    Fowle  v.  Park,  131  U.  S.  88,  658,  33  L. 
Ed.  67 ;  Bement  v.  National  Harrow  Co.,  186  U.  S.  70,  46  L.  Ed. 
1058;  Park  &  Sons  Co.  v.  National  Druggists'  Association,  175 
N.  Y.  1,  62  L.  R.  A.  632,  96  Am.  St.  Rep.  578 ;  Garst  v.  Harris, 
177  Mass.  72;  Dr.  Miles  Med.  Co.  v.  Goldthwaite  (C.  C.)  133 
Fed.  794;  Dr.  Miles  Med.  Co.  v.  Piatt  (C.  C.)  142  Fed.  606; 
Dr.  Miles  Med.  Co.  v.  Jaynes  Drug  Co.  (C.  C.)  149  Fed.  838; 
Walsh  V.  Dwight,  40  App.  Div.  513.    Many  of  these  decisions,  / 
it  is  true,  deal  with  contracts  concerning  the  sale  of  patented  \ 
or  proprietary  articles,  and  are  based,  to  some  extent,  upoaU 
the  principle  that  a  monopoly  right  is  inherent  in  a  patent  orU 
in  an  article  produced  according  to  a  formula  known  only  to 
its  manufacturer.    It  has  been  questioned  whether  the  fact  that 
an  article  is  produced  under  a  secret  formula  is  of  any  impor-  )^ 
tance  in  determining  the  validity  of  contracts  regulating  its 
sale.    Hartman  v.  John  D.  Park  &  Sons  Co.  (C.  C.)  145  Fed. 
358;  s.  c,  on  appeal,  John  D.  Park  &  Sons  Co.  v.  Hartman, 


254    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

82  C.  C.  A.  158,  12  h.  R.  A.  (N.  S.)  135.    However  this  may 
be,  we  are  cited  to  no  case  which  holds  that  a  contract  like  the 
one  at  bar  is  invalid  as  between  the  parties  to  it,  whether  it 
deals  with  an  article  produced  under  patent  or  secret  formula 
or  one  that  may  be  produced  by  any  one.    The  tendency  of  the 
modem  decisions  has  been  to  view  with  greater  liberality  con- 
tracts claimed  to  be  in  restraint  of  trade.    It  is  not  every  limi- 
tation on  absolute  freedom  of  dealing  that  is  prohibited.    As  is 
said  by  the  Supreme  Court  of  the  United  States  in  Gibbs  v. 
Consolidated  Gas  Co.,  130  U.  S.  396,  409,  32  L.  Ed.  979 :    'Pub- 
lic welfare  is  first  considered,  and  if  it  be  not  involved,  and  the 
restraint  upon  one  party  is  not  greater  than  protection  to  the 
other  requires,  the  contract  may  be  sustained.     The  question 
is  whether,  under  the  particular  circumstances  of  the  case,  and 
the  nature  of  the  particular  contract  involved  in  it,  the  con- 
tract is,  or  is  not,  unreasonable.'    So  in  People's  Gaslight  Co. 
v.  Chicago  Gaslight  Co.,  20  111.  App.  492,  the  court  says:   'The 
tendency  of  the  courts  is  to  regard  contracts  in  partial  restraint 
of  competition  with  less  disfavor  than  formerly,  and  the  strict- 
ness  of  the  ancient  rule  has  been  greatly  modified  by  the 
modern  decisions.'     Many  decisions  announcing  views  similar 
to  those  declared  in  these  quotations  are  cited  with  approval 
by  this  court  in  Herriman  v.  Menzies,  supra,  and  it  must  be 
taken  to  be  settled  that  the  sections  of  Civ.   Code,   §§  1673, 
1674,  1675,  relating  to  contracts  in  restraint  of  trade,  are  to  be 
construed  in  the  light  of  these  principles.     Herriman  v.  Men- 
zies, 115  Cal.  16,  46  Pac.  730,  35  L.  R.  A.  318,  56  Am.  St.  Rep. 
81.    In  Smith  v.  S.  F.  &  N.  P.  Ry.  Co.,  115  Cal.  584,  604,  35  L. 
R.  A.  309,  56  Am.  St.  Rep.  119,  this  court  said:    'The  rule  in- 
validating  contracts  in  restraint  of  trade   does  not   include 
every  contract  of  an  individual  by  which  his  right  to  dispose 
of  his  property  is  limited  or  restrained.     Section  1673  of  the 
Civil  Code  makes  void  every  contract  by  which   one  is  re- 
strained from  "exercising  a  lawful  profession,  trade  or  busi- 
ness," except  in  certain  instances.     But  this  is  far  different 
from  a  contract  limiting  his  right  to  dispose  of  a  particular 
piece   of  property,   except  upon  certain   conditions.     As  the 
owner  of  property  has  the  right  to  withhold  it  from  sale,  he  can 
also,  at  the  time  of  its  sale,  impose  conditions  upon  its  use 
without  violating  any  rule  of  public  policy.     .     .     .' 


THE  COMMON  LAW  255 

' '  The  necessary  result  of  what  we  have  said  is  that  the  com- 
plaint must  be  held  sufficient.  It  is  alleged  that  the  defendant 
bought  oil  under  an  express  agreement  that  he  would  not  sell 
it  at  less  than  given  prices,  and  that  he  had  sold  and  threatened 
to  sell  it  at  less  than  such  prices.  This  is  a  violation  of  plain- 
tiff's rights  under  his  contract.  Whether  this  contract  could 
be  enforced  against  persons  who  might  come  into  possession 
of  plaintiff's  oil,  with  notice  of  the  restriction  imposed  by  him 
on  its  sale,  but  without  having  made  any  direct  agreement  to 
respect  such  restriction  is  a  question  not  here  presented.  See 
Garst  V.  Hall  &  Lyon  Co.,  179  Mass.  589,  55  L.  R.  A.  631." 

The  rehearing  was  ordered  to  enable  the  court  to  give 
further  consideration  to  the  views  of  the  United  States  Circuit 
Court  of  Appeals  for  the  Sixth  Circuit,  as  declared  in  Park  & 
Sons  Co.  V.  Hartman,  82  C.  C.  A.  158,  12  L.  R.  A.  (N.  S.)  135, 
and  restated  in  Miles  Med.  Co.  v.  Park  &  Sons  Co.,  90  C.  C.  A. 
579.  Judge  Lurton  was  the  author  of  each  of  these  opinions. 
The  first  contains  a  very  elaborate  and  learned  discussion  of 
the  law  governing  some  of  the  questions  involved. 

It  may  be  said  that  neither  of  these  cases  involved  the  ques- 
tion here  presented;  i.  e.,  the  enforceability  as  between  the 
parties  of  a  contract  of  the  kind  here  shown.  The  corporation 
complainant  in  each  instance  sought  to  obtain  relief  against 
persons  who  had  entered  into  no  contractual  relation  with  it. 
It  must,  however,  be  confessed  that  the  views  there  expressed 
upon  the  general  question  of  the  validity  of  a  system  of  con- 
tracts like  that  here  involved  is  opposed  to  what  was  declared 
by  us  in  our  opinion.  Most  of  the  cases  cited  by  us  in  our 
opinion  heretofore  filed  are  reviewed  by  Judge  Lurton  in  Park 
V.  Hartman  and  are  either  disapproved  or  sought  to  be  dis- 
tinguished. It  does  not  appear  to  us,  however,  that  the  attempt 
to  distinguish  has  in  all  instances  been  entirely  successful, 
and,  notwithstanding  the  great  respect  entertained  by  us  for 
so  able  and  learned  a  court  as  that  which  decided  the  cases  of 
Park  V.  Hartman  and  Miles  V.  Park,  we  must  remain  of  the 
opinion  that  the  conclusion  there  reached,  so  far  as  it  is  ap- 
plicable to  the  case  before  us,  is  contrary  to  the  weight  of 
authority. 

In  our  former  opinion  something  was  said  about  the  effect 
upon  this  litigation  of  the  so-called  Cartwright  act  (St.  1907,  p. 


256    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

984,  c.  530),  which  had  been  enacted  after  the  date  of  this 
appeal.  That  statute  has  recently  been  amended.  St.  1909,  p. 
593,  c.  362.  The  constitutionality  of  the  amending  act  is  not 
here  questioned,  nor  is  it  suggested  that  the  contract  relied  on 
appears  on  the  face  of  the  complaint  to  be  obnoxious  to  the 
terms  of  the  law  as  it  now  stands.  Whether  or  not  a  defense 
to  the  action  could  be  based  on  the  Cartwright  act  is  a  question 
not  now  before  us.  At  the  present  time,  and  on  the  record  and 
argument  here  presented,  there  is  no  occasion  to  discuss  the 
constiTiction  or  applicability  of  the  statute. 

The  judgment  is  reversed,  with  directions  to  the  superior 
court  to  overrule  the  demurrer,  granting  leave  to  the  defendant 
to  answer.29 

Beatty,  C.  J.,  dissented. 


Section  5 
combinations  and  competitive  methods 

HILTON  v.   ECKERSLEY 

\_,  (Queen's  Bench   and   Exchequer   Chamber,   1855. 

.  6  Ellis  &  Bl.  47.) 

Action  on  a  bond  for  £500,  of  which  plaintiff  was  obligee 
and  defendant  obligor. 

The  plea  set  out  the  bond,  whereby  William  Johnson,  of 
Wigan,  in  the  county  of  Lancaster,  cotton  spinner;  Nathaniel 
Eckersley  (defendant),  cotton  spinner  and  manufacturer,  and 
eleven  others  each  described  as  cotton  spinner  or  spinster  and 
one  also  as  manufacturer,  all  of  Wigan  aforesaid,  and  five 
others,  each  described  as  cotton  spinner,  all  of  Hindley,  in 

29 — Accord:    Elliman,  Sons  &  Co.  of    breaking    the    contract    upon    a 

V.  Carrington  &   Son,  L.  E.   [1901]  re-sale  to  the  defendant)  ;   Clark  v. 

2  Ch.  275  (damages  allowed)  ;  Garst  Frank,   17   Mo.   App.   602    (contract 

V.   Harris,    177    Mass.   72    (damages  to   maintain   the   price   of   thread)  ; 

allowed)  ;     Garst     v.     Charles,     187  New    York    Ice    Co.    v.    Parker,    21 

Mass.      144       (injunction      allowed  Howard  Practice  (N.  Y.)  302  (con- 

against  the   defendant  who   secured  tract  to  maintain  price  of  ice). 
a  dealer  to  purchase  for  the  purpose 


THE  COMMON  LAW  25? 

the  county  of  Lancaster,  were  respectively  and  separately 
bound  to  Caleb  Hilton  (plaintiff),  of  Wigan  aforesaid,  attor- 
ney at  law,  in  £500,  subject  to  the  following  condition: 

"Whereas  the  above  bounden,  William  Johnson,  Nathaniel 
Eekersley,"  &c.  (naming  the  eighteen  obligors),  "are  re- 
spectively owners  or  occupiers  of  mills  and  premises  in  Wigan 
and  the  neighborliood,  in  the  county  of  Lancaster,  for  the 
spinning  and  manufacturing  of  cotton,  yarn,  and  cloth,  and 
employ  therein  many  workpeople  and  servants;  and  whereas 
there  are  certain  societies,  or  combinations,  or  implied  ar- 
rangements, or  understood  agreements,  subsisting  in  the  said 
county  amongst  divers  persons,  whereby  persons  otherwise 
willing  to  be  employed  in  the  said  works  are  deterred,  by  a 
reasonable  fear  of  social  persecution  and  other  injuries,  from 
hiring  themselves  to  work  in  the  said  establishments,  and 
whereby  the  legal  control  and  management  of  the  said  obli- 
gors ^'^  of  their  property  and  establishments  are  injuriously  in- 
terfered with;  and  whereas  the  said  combinations  are  sus- 
tained by  funds  arbitrarily  levied  and  extorted  by  way  of 
tax  or  rate  upon  the  persons  employed  by  the  same  obligors 
respectively,  and  receiving  wages  from  them;  and  it  hath 
become  necessary  in  the  opinion  of  the  said  obligors  to  take 
measures  for  vindicating  their  legal  rights  to  the  control  and 
management  of  their  own  property;  which  will  also  best 
sustain  the  rights  of  the  laborer  to  the  free  disposal  of  his  skill 
and  industry:  and  therefore  the  said  several  obligors  have 
agreed  to  carry  on  their  said  works,  in  regard  to  the  amount  of 
wages  to  be  paid  to  persons  employed  therein,  and  the  times 
or  periods  of  the  engagement  of  workpeople,  and  the  hours  of 
work,  and  the  suspending  of  work,  and  the  general  discipline 
and  management  of  their  said  works  and  establishments  in 
conformity  to  law,  for  the  period  of  twelve  calendar  months 
from  the  date  of  the  above  written  bond,  in  conformity  with 
the  resolution  of  a  majority  of  the  said  obligors  present  at 
any  meeting  to  be   convened  as  hereinafter  mentioned:    and, 

30 — Throughout  the  condition,  the  quence  of  this  mistake,  the  case  be- 

vvord    "obligees"    was    written    in-  ing  argued  as  if  the  condition  had 

stead  of  "obligors."     The  plea  set  been  correctly  written;  and  the  text 

out  the  condition  as  it  was  written,  is  corrected  accordingly.     (Rep.) 
but   no    point   was   made    in    conse- 
Kales  B.  of  T.  Vol.  1—17 


258    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

for  the  purpose  of  carrying  the  said  agreement  into  effect,  the 
said  obligors  have  entered  into  the   above  written  bond   or 
obligation,   conditioned  as  hereinafter  mentioned:     Now  the 
condition  of  the  above  written  bond  or  obligation  is  such  that, 
if  the  said  several  obligors,  and  their  respective  partners  in 
the  business  carried  on  at  the  said  works,  shall,  for  the  period 
of  twelve  calendar  months  from  the  date  of  the  above  written 
bond  or  obligation,  carry  on  and  conduct,  or  wholly  or  par- 
tially suspend  the  carrying  on  of,  their  said  works  and  estab- 
lishments,   in    regard    to    the    several    matters    aforesaid,    m 
conformity  with  the  resolutions  in  that  behalf  of  a  majority 
of  the  said  obligors  present  at  a  meeting  to  be  held  as  here- 
inafter mentioned,  then  the  above  written  bond  or  obligation, 
in  regard  only  of  the  persons  respectively  so  performing  this 
condition,  shall,  as  to  the  sum  of  £500,  in  which  he  is  bond, 
become  void,  or  otherwise  the  same  to  remain  in  full  force. 
And  it  is  hereby  declared  that,  on  the  3rd  and  8th  days  of 
October  instant,  meetings  of  the  said  obligors  were  held  at 
the  Victoria  Hotel,  at  the  hour  of  four  in  the  afternoon;  at 
which  meetings  a  chairman   and  secretary   were   appointed; 
and   which   said   meetings   had   authority   to   make,    and   did 
make    and    prescribe,    times,    rules,    and    regulations   for   the 
holding  and  conducting  of  ordinary  meetings  and  the  conven- 
ing of  special  meetings;  and  which  times,  rules,  and  regula- 
tions may,  at  any  ordinary  or  special  meeting,  be  varied  or 
rescinded,  and  others  substituted ;  and  all  resolutions  agreed  to 
by  a  majority  of  the  obligors  present  at  any  such  meeting 
shall  be  deemed  the  resolutions  of  the  said  meeting ;  and  every 
meeting  so  held  as  aforesaid  shall  be  deemed  to  be  a  meeting 
within  the  meaning  of  the  above  written  condition.    Provided, 
always,  and  it  is  hereby  declared,  that  all  moneys  which  shall 
be  received  by  the  said  Caleb  Hilton,  his  executors  or  admin- 
istrators, upon  the  above  written  bond,  shall  be  held  by  him 
or  them  in  trust  for  the  equal  benefit  of  all  the  obligors,  their 
respective  executors,   administrators,   and  assigns.     Provided 
also  that  the  said  bond  shall  not  be  put  in  suit  without  the 
consent  of  a  majority  of  the  said  obligors  present  at  a  meeting 
to  be  held  as  aforesaid.    Provided,  also,  that  it  shall  be  lawful 
for  a  majority  of  the  said  obligors  present  at  any  such  meet- 
ing to  pass  a  resolution  releasing  and  discharging  the  said 


THE  COMMON  LAW  259 

obligors  respectively  from  the  further  performance  of  the 
said  condition.  In  witness,"  &c.  Allegation  that,  save  as 
appears  by  the  said  condition,  there  was  no  consideration  for 
the  execution  of  the  said  bond  by  the  defendant.  And  that, 
by  reason  of  the  premises,  the  said  bond  was  and  is  a  bond  in 
restraint  of  trade,  illegal  and  void. 

Demurrer.    Joinder. 

The  case  was  argued  in  the  Court  of  Queen's  Bench,  in  last 
Easter  Term,  [April  27th,  1855.  Before  Lord  Campbell,  C.  J., 
Erle  and  Crompton,  Js.]  by  Cowling  for  the  plaintiff  and 
Mellish  for  the  defendant.  It  is  considered  sufficient,  for  the 
argument,  to  refer  to  the  argument  in  the  Exchequer  Cham- 
ber and  the  judgments  delivered  in  the  two  courts. 

Cur.  adv.  vidt. 

On  this  day,  there  being  a  difference  of  opinion  upon  the 
Bench,  the  learned  Judges  delivered  judgment  seriatim. 

CROMPTON,  J. — In  this  case  the  plaintiff  declared  upon  a 
bond  for  £500.  The  defendant  in  his  plea  set  out  the  bond; 
by  which  it  appeared  that  the  defendant  and  seventeen  others 
were  bound  to  the  plaintiff,  each  in  a  separate  and  distinct 
sum  of  £500.  The  plea  then  set  out  the  condition  of  the  bond ; 
whereby,  after  reciting  that  the  obligors  were  respectively 
owners  of  mills,  in  Wigan  and  the  neighborhood,  for  spinning 
and  manufacturing,  and  employed  therein  many  workpeople 
and  servants,  and  that  there  were  certain  societies  or  com- 
binations amongst  divers  persons,  whereby  persons,  otherwise 
willing  to  be  employed,  were  deterred  by  fear  of  social  perse- 
cution and  other  injuries  from  hiring  themselves  to  work,  and 
whereby  the  legal  control  of  the  said  obligors  of  their  prop- 
erty was  injuriously  interfered  with;  and  that,  whereas  the 
said  combinations  were  sustained  by  funds  arbitrarily  levied 
and  extorted  by  way  of  tax  or  rate  upon  the  persons  employed 
by  the  said  obligors  and  receiving  wages  from  them,  and  it 
had  become  necessary,  in  the  opinion  of  the  said  obligors,  to 
take  measures  for  vindicating  their  legal  rights  to  the  control 
and  management  of  their  own  property,  which  would  also 
best  sustain  the  rights  of  the  laborer  to  the  free  disposal  of 
his  skill  and  industry ;  and  therefore  the  said  several  obligors 
had  agreed  to  carry  on  their  said  works,  in  regard  to  the 


260    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

amount  of  wages  to  be  paid  to  persons  employed  therein,  and 
the  times  or  periods  of  the  engagement  of  workpeople,  and 
the  hours  of  work,  and  the  suspending  of  work,  and  the  gen- 
eral discipline  and  management  of  their  said  works  and 
establishment,  in  conformity  to  law,  for  the  period  of  twelve 
calendar  months  from  the  date  of  the  above  written  bond,  in 
conformity  with  the  resolutions  of  a  majority  of  the  said 
obligors  present  at  any  meeting  to  be  convened ;  and  after 
reciting  that,  for  the  purpose  of  carrying  the  said  agreement 
into  effect,  the  said  obligors  entered  into  the  above  written 
bond :  the  condition  of  the  obligation  was  declared  to  be  that, 
if  the  said  several  obligors  and  their  respective  partners  should, 
for  twelve  calendar  months  from  the  date  of  the  bond,  carry  on 
and  conduct,  or  wholly  or  partially  suspend  the  carrying  on  of, 
their  said  works  and  establishments  in  regard  to  the  several 
matters  aforesaid  in  conformity  with  the  resolutions  in  that 
behalf  of  a  majority  of  the  said  obligors  present  at  a  meeting  to 
be  held  as  mentioned  in  the  agreement,  then  the  above-written 
bond,  in  regard  only  of  the  persons  respectively  so  performing 
this  condition,  should,  as  to  the  sum  of  £500  in  which  he  was 
bound,  become  void;  or  otherwise  the  same  to  remain  in  full 
force.  The  condition  then  proceeded  to  state  the  days  and 
place  of  meeting,  and  that  all  resolutions  agreed  to  by  a  ma- 
jority of  the  obligors  present  should  be  deemed  the  resolutions 
of  the  said  meeting,  and  that  every  meeting  so  held  should  be 
held  to  be  a  meeting  within  the  meaning  of  the  above  written 
condition :  also  that  the  plaintiff  should  hold  all  moneys  recov- 
ered by  him  in  trust  for  all  the  obligors,  etc. :  provided  that  the 
bond  should  not  be  put  in  suit  without  the  consent  of  a  ma- 
jority of  the  obligors  present  at  a  meeting :  provided,  also,  that 
it  should  be  lawful  for  a  majority  of  the  said  obligors  present 
to  pass  a  resolution  releasing  the  said  obligors  respectively 
from  the  performance  of  the  said  condition.  The  plea  then 
stated  that,  except  as  it  appeared  by  the  condition,  there  was 
no  consideration  for  the  execution  of  the  bond  by  the  defend- 
ant; and  that  the  bond  was  in  restraint  of  trade,  illegal  and 
void.  The  plaintiff  having  demurred  to  this  plea,  the  demurrer 
was  argued  before  us  in  the  course  of  last  Easter  Term,  And 
the  question  for  our  consideration  is,  Whether  a  bond  of  this 
nature  can  be  enforced  at  law. 


THE  COMMON  LAW  261 

I  am  of  opinion  that  the  bond  is  void,  as  being  against  public 
policy.  I  think  that  combinations  like  that  disclosed  in  the 
pleadings  in  this  case  were  illegal  and  indictable  at  common 
law,  as  tending  directly  to  impede  and  interfere  with  the  free 
course  of  trade  and  manufacture.  The  precedents  of  indict- 
ments for  combinations  of  two  or  more  persons  to  raise  wages, 
and  for  other  offenses  of  this  nature,  which  were  all  framed  on 
the  common  law  and  not  under  any  of  the  statutes  on  the 
subject,  sufficiently  show  what  the  common  law  was  in  this 
respect.  In  Rex  v.  Mawbey,  6  T.  R.  619,  636,  Grose,  J.,  as- 
sumed the  illegality  of  such  combinations  as  well  known  law.- 
Combinations  of  this  nature,  whether  on  the  part  of  the  work- 
Imen  to  increase,  or  of  the  masters  to  lower,  wages,  were  equally 
1  illegal. 

By  recent  enactments,  carefully  worded,  combinations  to 
raise  or  lower  the  rate  of  wages,  and  to  regulate  the  hours  of 
labor,  are  made  no  longer  punishable.  But  these  enactments  do 
not  make  such  combinations  legal  agreements  in  the  sense  that 
the  breach  of  them  can  be  enforced  at  law;  and  still  less  do 
they  apply  to  make  enforceable  at  law  an  agreement,  not  being 
a  mere  stipulation  among  the  parties  themselves  which  any  one 
might  withdraw  from  at  his  pleasure,  but  binding  and  tying 
themselves  up,  under  a  penalty,  to  close  their  works  if  a  ma- 
jority of  a  particular  body  shall  dictate  to  them  so  to  do,  I 
think  this  bond  void,  as  being  in  restraint  of  the  freedom  of 
trade,  and  from  its  mischievous  and  dangerous  tendency, 
pointed  out  in  the  argument,  with  respect  to  strikes  and  com- 
binations. The  general  principle  of  contracts  in  restraint  of 
trade  being  void  is  perfectly  well  established:  and  this  case 
does  not  appear  to  me  to  fall  within  any  of  the  exceptions  and 
relaxations  which  have  been  allowed  as  to  that  principle. 

Most  of  such  cases  have  occurred  where  one  party  has  sold 
a  trade  or  profession  to  another,  or  where  one  party  has  learned 
the  trade  and  its  secrets  from  the  other,  and  where,  on  such 
considerations,  stipulations  have  been  entered  into  whereby 
the  one  party  undertakes  not  to  exercise  the  trade  or  profession 
within  reasonable  limits  as  to  time  and  distance.  In  the  present 
case,  the  agreement  is  that,  in  a  certain  event,  all  the  parties 
contracting  are  to  close  their  works.  And  the  consideration  of 
the  promise  of  each  is  the  promise  of  the  others  likewise  to 


262    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

close  their  works.    So  that  the  public  are  not  recompensed  for 
the  ceasing  of  one  party  by  the  other  parties  being  able  to  carry 
on  their  trade  with  increased  facilities.    It  is,  I  believe,  the  first 
case  where  the  mutually  abstaining  from  trade  has  been  the 
consideration  for  a  bond  of  this  nature.     The  case  of  a  bond, 
whereby  a  number  of  persons,  who  manifestly  appear  to  con- 
stitute a  great  body  of  master  manufacturers,  mutually  bind 
themselves  to  close  their  works  at  the  will  of  the  majority 
present  at  a  meeting,  and  whether  or  no  they  individually  think 
it  right  or  desirable  so  to  do,  seems  to  me  entirely  beyond  any 
relaxation  that  has  ever  been  made  of  the  general  rule  appli- 
.  cable  to  agreements  in  restraint  of  trade.    Here,  instead  of  the 
j  ''  arrangement  being  that  one  party  shall  not  carry  on  trade  in 
1 1  order  that  another  may  do  it  more  advantageously,  the  object 
ij  is  that  all  shall  close  as  a  means  of  compulsion  against  the 
\  ]  workmen. 

^^  One  of  the  most  objectionable  parts  of  this  bond  is  that  it 
takes  away  the  freedom  of  action  of  the  individual  to  carry  on 
the  trade,  and  to  open  and  close  his  works  according  as  it  may 
be  for  his  interest  or  that  of  the  public.  It  appears  to  me 
obviously  mischievous  that  the  parties  should  give  up  this 
right  of  judging  for  themselves,  and  place  themselves  and  their 
trades  under  the  dictation  either  of  a  majority  or  of  a  commit- 
tee of  delegates,  which  seems  the  same  in  principle. 

The  agi-eements  or  combinations  allowed,  or  rather  rendered 
not  punishable,  by  the  modern  Acts  of  Parliament,  are  much 
less  mischievous,  and  seems  less  contrary  to  the  free  course  of 
trade,  if  every  party  can  withdraw  from  the  association  at  his 
free  will  and  pleasure.  And  it  is  accordingly  permitted  by  the 
Legislature  that  either  masters  or  workmen  may  join  in  agree- 
ing to  work  or  be  worked  for  according  to  certain  rates  or 
times.  At  least  the  Legislature  has  sanctioned  this,  so  far  as  to 
prevent  its  being  punishable.  But,  as  soon  as  the  party  agrees 
to  bind  himself  by  penalties  to  give  up  his  right  of  retiring  from 
such  combination,  that  freedom  of  trade  which  it  is  the  policy 
of  the  law  to  protect  seems  directly  interfered  with.  Suppose, 
in  the  present  case,  that  the  workmen  agree  to  proper  and 
reasonable  terms,  and  that  the  majority  still  insist  on  closing: 
the  individual  obligor  is  bound  to  shut  up  his  own  mill,  and  to 
be  in  effect  a  party  to  the  closing  of  seventeen  others,  although 


THE  COIVBION  LAW  263 

he  is  perfectly  satisfied  that  in  doing  so  he  is  acting  contrary 
to  his  own  interests,  as  well  as  to  the  interests  of  the  workmen, 
the  trade,  and  the  public. 

The  same  observation  applies  to  the  case  of  the  workmen 
themselves.  If  this  bond  is  legal,  in  the  sense  of  being  enforce- 
able at  law,  a  promise  on  the  part  of  any  individual  workman 
not  to  retire  from  the  strike,  or  to  pay  a  weekly  subscription  to 
it,  or  to  pay  a  penalty  if  he  went  to  work  without  the  leave  of 
the  majority  of  a  meeting,  or  disobeyed  the  dictation  of  the 
delegates,  would  be  binding  upon  him :  and  no  workman  would 
be  able  to  free  himself  from  the  tyranny  of  such  dictation, 
whatever  might  be  the  state  of  his  family,  however  reasonable 
he  might  think  the  offer  of  his  masters  as  to  wages,  and  al- 
though he  might  be  perfectly  satisfied,  in  his  own  mind,  that 
the  longer  continuance  of  the  strike  was  ruining  himself,  his 
family,  and  his  fellow-workmen,  and  was  doing  incalculable 
injury  to  the  public. 

It  is  said,  indeed,  that  the  object  of  the  bond  is  to  defend  the 
parties,  and  to  enable  them  to  meet  the  combination  of  work- 
people. But  I  think  that  agreements  of  this  nature,  on  the  one 
side  or  other,  or  both,  really  tend  to  prolong  the  mischief :  and, 
however  right  it  may  be  that  the  masters  or  workmen  should 
respectively  stand  by  and  assist  each  other  in  resisting  what 
they  consider  unfair  demands,  yet  that  the  giving  up  their 
individual  right  of  judging  and  acting  for  themselves  in  mat- 
ters so  greatly  affecting  the  public  is  mischievous  and  danger- 
ous in  the  extreme.  I  think  it  not  to  be  endured  that  majorities 
and  delegates,  of  workmen  or  masters,  should  in  effect  be 
allowed  to  legislate  upon  questions  immediately  affecting  the 
happiness  of  the  working  classes  and  the  prosperity  of  the 
trade  and  commerce  of  the  whole  nation. 

If  agreements  like  the  present  were  enforceable  at  law,  I  see 
no  reason  why  (as  observed  by  Mr.  Mellish)  they  should  not 
be  enforceable  in  equity:  and  our  Courts  of  Equity  might  be 
called  upon  to  enjoin  masters  against  opening  their  mills,  or 
workmen  from  going  to  work  or  discontinuing  a  strike ;  whilst 
our  county  courts  would  have  to  make  decrees  for  the  con- 
tributions to  strike,  or  to  enforce  penalties  from  workmen  who 
have  felt  it  their  duty  to  resume  employment. 

It  was  contended,  on  the  part  of  the  plaintiff,  by  Mr.  Cow- 


264    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ling,  that  some  part  of  this  agreement  might  be  good,  and  that 
the  bond,  with  reference  to  such  part,  would  not  be  invalid. 
But  I  think  that  the  illegality  pervades  the  whole  agreement, 
and  that,  part  of  the  consideration  of  the  bond  being  that  the 
works  should  be  closed  according  to  the  dictation  of  the  ma- 
jority, the  whole  instrument  is  illegal,  even  if  part  of  the 
engagement  of  each  obligor  were  held  according  to  Mr.  Cow- 
ling's argument  to  be  legal. 

I  am  clearly  of  opinion  that  the  whole  instrument  is  tainted 
with  illegality;  and  I  therefore  think  that  our  judgment  ought 
to  be  given  for  the  defendant. 

ERLE,  J. — The  question,  whether  the  bond  declared  on  is 
▼oid,  is  raised  under  the  circumstances  appearing  in  the  con- 
dition: which  recites  that  the  obligors  are  manufacturers  in 
Wigan  and  Hindley,  and  that  combinations  of  workmen,  pre- 
venting free  labor  by  fear  of  social  persecution,  injuriously 
interfere  with  the  management  of  their  manufactories;  and 
that  these  combinations  are  sustained  by  funds  extracted  from 
workmen  employed  by  the  obligors;  and  that  measures  are 
necessary  to  protect  as  well  the  obligors  in  the  free  manage- 
ment of  their  capital  as  the  workmen  in  the  free  disposal  of 
their  labor :  wherefore  the  obligors  have  agreed,  in  regard  to  the 
amount  of  wages,  the  periods  of  engagement,  the  hours  of  work, 
and  the  general  management  of  their  establishments,  to  act  in 
conformity  with  the  lawful  resolutions  of  a  majority  of  the 
obligors  present  at  a  meeting;  and  declares  that  the  bond  shall 
be  void  if  this  agreement  is  performed.  The  masters  have  thus 
contracted  to  co-operate  for  the  protection  of  their  interests 
against  injurious  results  from  existing  combinations  of  workmen. 

It  was  contended  that  this  agreement  was  unlawful,  on 
account  of  being  in  restraint  of  trade.  But,  according  to  the 
recital,  the  purpose  of  the  agreement  and  its  tendency  was  for 
the  advancement  of  trade.  The  workmen,  by  combining  not  to 
work  for  one  master  while  they  are  supported  by  wages  from 
the  others,  may  ruin  each  separately:  and,  unless  the  masters 
can  protect  themselves  more  effectually  than  by  indictment, 
there  is  danger  of  the  trade  being  destroyed,  and  the  capital 
being  removed  from  the  neighborhood  or  from  the  country  to 
a  more  secure  place.    Also,  as  the  agreement  is  to  act  in  con- 


THE  COIVBION  LAW  265 

formity  with  the  resolutions  of  the  majority,  and  those  resolu- 
tions may  require  the  business  to  be  carried  on  to  the  fullest 
possible  extent,  the  agreement  ought  not  to  be  held  void  as  in 
restraint  of  trade  unless  it  was  shown  by  averment  that  it  do 
so  operate. 

Even  if  the  agreement  was  construed  to  be  in  restraint  of 
trade  because  it  interfered  with  the  free  will  of  the  masters  in 
their  management,  still  it  does  not  follow  that  it  is  illegal ;  as 
agreements  in  restraint  of  trade  are  legal  if  required  for  the 
protection  of  the  lawful  interests  of  the  contracting  parties. 
Thus,  masters  may  contract  to  restrain  their  servants  and  ap- 
prentices from  trade  in  a  certain  neighborhood.     So  also  the 
purchaser  of  the  good-will  of  a  business  may  restrain  the  vendor 
from  trading  within  a  certain  area :  and  the  landlord  of  a  house 
may  restrain  his  lessee  from  trade  therein,  if  it  would  be  likely 
to  lower  the  value  of  the  property.    The  right  to  agree  for  a 
restraint  of  trade  on  account  of  the  protection  of  a  lawful 
interest  is  fully  explained  in  Hitchcock  v.  Coker,  6  A.  &  E.  438 
(E.  C.  L.  R.  vol.  33),  and  Mallan  v.  May,  11  M.  &  W.  653.    In  ( 
the  present  case  the  obligors  are  shown  by  the  recital  to  have  ^ 
an  important  interest,  for  the  protection  of  which  this  agree- 1 
ment  was  necessary ;  and  there  is  no  reason  for  saying  that  the  i 
restraint  was  greater  than  was  required  for  that  protection. 

The  opinion  that  this  agreement  is  valid  at  common  law 
derives  confirmation  from  a  consideration  of  the  statute  law. 
The  Legislature,  by  various  statutes,  from  the  reign  of  Ed.  1 
to  that  of  G.  4,  prohibited  agreements,  either  of  masters  or  of 
workmen,  for  the  purpose  either  of  lowering  or  raising  wages, 
or  of  altering  hours,  or  otherwise  affecting  their  mutual  rela- 
tions. These  agreements  were  by  some  statutes  enacted  to  be, 
and  by  others  declared  to  be,  illegal ;  and  the  parties  entering 
into  them  were  liable  to  punishment.  By  stat.  6  G.  4,  c.  129, 
an  entire  change  of  the  law  was  made.  By  section  2  all  the 
statutes  prohibiting  such  agreements  are  enumerated  and  abso- 
lutely repealed.  By  section  3  future  prohibition  is  confined  to 
endeavors,  by  force,  threats,  intimidation,  molestation,  or  ob- 
struction, to  affect  wages  or  hours,  which  are  made  illegal  and 
punishable ;  and,  by  sections  4  and  5,  it  is  declared  that  neither 
masters  nor  workmen  shall  be  punishable  for  any  agreements 


266    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

in  respect  of  wages  or  hours  unless  they  infringe  the  prohibi- 
tions in  the  3rd  section. 

Since  this  statute,  such  agreements  as  the  present,  if  illegal, 
must  be  made  so  by  the  common  law.  But  no  principle  or 
decided  case  has  been  adduced  showing  such  to  have  been  the 
law  before  these  statutes  passed:  and  it  seems  to  me  that  the 
Legislature  intended  by  this  statute  to  make  all  agreements  to 
which  it  relates  legal,  if  not  comprised  within  the  section  of 
prohibition ;  the  statute  repealing,  as  well  the  clauses  of  former 
statutes  which  render  these  agreements  illegal,  as  those  that 
made  them  punishable. 

The  Judges,  in  expounding  this  statute,  have  used  language 
denoting  that  in  their  opinion  the  agreements  either  of  masters 
or  of  workmen  respecting  wages  or  hours  are  legal :  and,  if  an 
agreement  is  legal,  it  follows  that  it  may  be  enforced  by  law. 

1  refer  to  the  charge  of  Tindal,  C.  J.,  in  Regina  v.  Harris, 
Car.  &  M.  661,  note  (a),  and  the  summing  up  of  Rolfe,  B.,  in 
R.  V.  Jones  and  Others,  [Qu.  Regina  v.  Selsby,  note  (a)  to  Row- 
land's Case,  2  Den.  C.  C.  R.  384]  and  of  Erle,  J.,  in  Regina  v. 
Rowlands,  17  Q.  B.  671,  686,  note  (b),  (E.  C.  L.  R.  vol.  69); 

2  Den.  C.  C.  R.  388,  note  (a),  with  the  judgment  of  Patteson, 
J.,  thereon  in  Rowland's  Case,  2  Den.  C.  C.  R.  389,  note  (a). 

Considerations  of  policy  confirm  this  view  of  the  law.  It  is 
supposed  that  attempts  to  affect  wages  by  intimidation  would 
be  more  rare,  and  that  the  misery  resulting  from  strikes  would 
be  diminished,  if  it  was  held  that  no  agreements  for  the  pur- 
pose of  affecting  wages  or  hours  should  be  enforced  by  the  law. 
But  it  seems  to  me  that  the  opposite  effect  would  result.  If 
all  such  agreements  were  excluded  from  the  law,  I  assume  that 
they  would  still  be  made;  because  they  were  frequently  made, 
even  when  prohibited  under  severe  penalties,  and  are  now  in 
constant  course:  and  the  Legislature  probably  thought  them 
irrepressible  by  prohibition.  Then,  if,  when  made,  they  cannot 
be  enforced  by  law,  the  parties  making  them  resort  to  social 
persecutions,  fear  and  force  for  their  enforcement :  and,  as  the 
control,  where  law  is  excluded,  frequently  devolves  upon  men 
either  unprincipled  or  ill  informed,  greater  misery  is  caused  by 
the  control  of  such  leaders  than  would  arise  from  the  sanctions 
of  the  law.  If  the  agreements  could  be  enforced  by  law,  they 
would  be  made  with  a  knowledge  of  rights  and  liabilities :  and 


THE  COIVmON  LAW  267 

the  enforcement  of  them  would  be  within  the  limits  of  the 
law,  and  for  the  most  part  free  from  purposeless  evil.  If  the 
law  protected  them,  it  would  be  for  the  law  to  decide  whether 
they  were  in  restraint  of  trade  beyond  what  was  required  for 
the  protection  of  any  lawful  interest ;  and,  if  so,  to  declare  them 
void  for  the  excess.  While,  on  the  other  hand,  if  they  should  be 
valid,  they  would  be  enforced  only  as  far  as  they  were  judged 
to  be  reasonable. 

Therefore,  in  my  opinion,  judgment  should  be  for  the 
plaintiff. 

LORD  CAMPBELL,  C.  J.  [This  judgment  was  read  by 
Crompton,  J.]  I  concur  with  my  brother  Crompton  in  think- 
ing that  there  ought  in  this  case  to  be  judgment  for  the  defend- 
ant. And,  agreeing  with  him  in  most  of  the  reasons  he  has  given 
for  his  opinion,  I  have  not  much  to  add  in  support  of  it. 

ButJ  am  not  prepared  to  say  that  the  combination  which  has 
been  entered  into  between  the  parties  to  this  bond  would  be 
illegal  at  common  law,  so  as  to  render  them  liable  to  an  indict- 
ment for  a  conspiracy.  Such  a  doctrine  may  be  deduced  from 
the  dictum  of  Grose,  J.,  in  Rex  v.  Mawbey,  6  T.  R.  636:  "As 
in  the  case  of  journeymen  conspiring  to  raise  their  wages:  each 
may  insist  on  raising  his  wages,  if  he  can ;  but  if  several  meet 
for  the  same  purpose,  it  is  illegal,  and  the  parties  may 
be  indicted  for  conspiracy."  Other  loose  expressions  may  be 
found  in  the  books  to  the  same  effect :  and,  if  the  matter  were 
doubtful,  an  argument  might  be  drawn  from  some  of  the  lan- 
guage of  the  statutes  respecting  combinations.  But  I  cannot 
bring  myself  to  believe,  without  authority  much  more  cogent, 
that,  if  two  workmen  who  sincerely  believe  their  wages  to  be 
inadequate  should  meet  and  agree  that  they  would  not  work 
unless  their  wages  were  raised,  without  designing  or  contem- 
plating violence  or  any  illegal  means  for  gaining  their  object, 
they  would  be  guilty  of  a  misdemeanor  and  liable  to  be  pun- 
ished by  fine  and  imprisonment.  The  object  is  not  illegal ;  and, 
therefore,  if  no  illegal  means  are  to  be  used,  there  is  no  in- 
dictable conspiracy.  Wages  may  be  unreasonably  low  or  un- 
reasonably high :  and  I  cannot  understand  why  in  the  one  case 
workmen  can  be, considered  as  guilty  of  a  crime  in  trying  by 
lawful  means  to  raise  them,  or  masters  in  the  other  can  be 


268    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

considered  guilty  of  a  crime  in  trying  by  lawful  means  to  lower 
them. 

Nor  can  I  say  that  there  is  any  statutable  enactment  which 
goes  the  full  length  of  rendering  this  bond  illegal  and  void. 
The  3rd  section  of  stat.  6  G.  4,  c.  129,  comes  very  near  it,  and 
shows  the  great  dislike  of  the  Legislature  to  such  proceedings. 
For  it  is  thereby  enacted  that,  "if  any  person  shall  use  or 
employ  violence  to  the  person  or  property  of  another,  or 
threats  or  intimidation,  or  shall  molest  or  in  any  loay  obstruct 
another  for  the  purpose  of  forcing  or  inducing  such  person  to 
belong  to  any  club  or  association,  or  to  contribute  to  any  com- 
mon fund,  or  to  pay  any  fine  or  penalty,  or  cm  account  of  his  not 
belonging  to  any  particular  club  or  association,  or  not  having 
contributed  or  having  refused  to  contribute  to  any  common 
fund,  or  to  pay  any  fine  or  penalty,  or  on  account  of  his  not 
having  complied  or  of  his  refusing  to  comply,  loith  any  rules, 
orders,  resolutions,  or  regulations"  "to  regulate  the  mode  of 
carrying  on  any  manufacture,  trade,  or  business,  or  the  man- 
agement thereof,"  every  person  so  offending  may  be  imprisoned 
and  kept  to  hard  labor  for  three  calendar  months.  If  suing 
upon  such  a  bond  could  be  considered  as  molesting  or  obstruct- 
ing the  obligor  within  the  meaning  of  this  section,  the  bond 
would  be  illegal  and  void.  But  the  molestation  and  obstruction 
here  contemplated  would  probably  be  considered  to  be  an 
unlawful  act  of  the  same  kind  with  those  specifically  described. 

I  am  therefore  obliged  to  bring  the  bond  within  the  category 
of  written  instruments  which  are  not  avoided  by  positive 
statute,  and  are  not  so  far  illegal  at  common  law  as  that  the 
framing  of  them  is  a  criminal  offence,  but  which  cannot  be 
enforced  by  action,  being  considered  void  as  against  public 
policy.  I  enter  upon  such  considerations  with  much  reluctance, 
and  with  great  apprehension,  when  I  think  how  different  gen- 
erations of  judges,  and  different  judges  of  the  same  generation, 
have  differed  in  opinion  upon  questions  of  political  economy 
and  other  topics  connected  with  the  adjudication  of  such  cases. 
And  I  cannot  help  thinking  that,  where  there  is  no  illegality  in 
bonds  and  other  instruments  at  common  law,  it  would  havft 
been  better  that  our  courts  of  justice  had  been  required  to 
give  effect  to  them  unless  where  they  are  avoided  by  Act  of 
Parliament.     By  following  a  different  course,  the  boundary 


THE  COMMON  LAW  269 

between  judge-made  law  and  statute-made  law  is  very  difficult 
to  be  discovered.  But  there  certainly  is  a  large  class  of  de- 
cisions, which  will  be  found  collected  in  the  report  of  the  recent 
Bridgewater  Case  in  the  House  of  Lords,  [Egerton  v.  Earl 
Brownlow,  4  H.  L.  Ca.  1]  to  the  effect  that,  if  a  contract  or  a 
will  is,  in  the  opinion  of  the  judges  before  whom  it  comes  in 
suit,  clearly  contrary  to  public  policy,  so  that  by  giving  effect 
to  it  the  interests  of  the  public  would  be  prejudiced,  it  is  to  be 
adjudged  void. 

When  I  look  at  this  bond,  I  have  no  hesitation  in  concluding 
that  the  association  which  it  establishes  ought  not  to  be  per- 
mitted, and  that  the  enforcing  of  the  bond  will  produce  public 
mischief.  I  therefore  feel  compelled  as  a  judge,  to  say  that  it 
is  void.  The  object  of  the  association  of  the  master  manufac- 
turers of  Wigan  is  very  laudable  to  put  down  an  illegal  asso- 
ciation of  the  workmen,  the  funds  of  which  are  arbitrarily 
levied  by  extortion,  and  to  protect  the  just  rights  of  the  mas- 
ters which  have  been  infringed.  But  the  means  sought  to  be 
employed  are  such  as  I  think  the  law  will  not  sanction.  There 
are  agreements  which,  although  to  a  certain  degree  in  restraint 
of  trade  and  of  the  free  action  of  individuals,  may  be  enforced 
by  action :  but  I  am  not  aware  of  any  contract,  so  far  in  re- 
straint of  trade  and  of  the  free  action  of  individuals  as  this 
bond,  to  which  courts  of  justice  have  given  effect.  I  do  not 
think  that  any  averment  is  necessary  as  to  what  has  been  done 
under  it,  or  as  to  any  mischiefs  which  it  has  actually  produced. 
We  are  to  consider  what  may  be  done  under  it,  and  what 
mischiefs  may  thus  arise.  All  the  master  manufacturers  in  a 
large  district  are  obliged  for  a  twelvemonth  to  carry  on  their 
trade  in  the  manner  in  which  a  majority  of  them  may  direct; 
and  during  that  time  they  may  all  be  compelled  entirely  to 
shut  up  their  manufactories  and  to  dismiss  their  men:  they 
are  obliged  to  contribute  to  the  funds  of  the  association,  and 
cannot  withdraw  from  it,  although  they  may  think  that  its 
object  has  been  effectually  gained,  or  however  much  they  may 
disapprove  of  its  proceedings.  If  such  an  association  is  good 
for  such  a  district,  it  would  be  equally  good  for  the  whole 
county  of  Lancaster,  or  for  the  whole  realm  of  England.  And, 
if  the  will  of  a  majority  may  be  the  rule  of  action  for  all  who 
are  associated,  so  may  the  will  of  a  single  individual.    Again, 


270    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

there  must  be  entire  reciprocity  between  liberty  to  the  masters 
and  liberty  to  the  men :  and  it  seems  to  me  that  a  decision  in 
favor  of  this  bond  would  establish  a  principle  upon  which  the 
fantastic  and  mischievous  notion  of  a  "Labor  Parliament" 
might  be  realized  for  regulating  the  wages  and  the  hours  of 
labor  in  every  branch  of  trade  all  over  the  empire.  The  most 
disastrous  consequences  would  follow  to  masters  and  to  men, 
and  to  the  whole  community. 

I  should  have  been  much  better  pleased  if  a  clear  rule  has 
been  expressly  laid  down  to  me  by  the  Legislature :  but,  being 
required  to  form  and  to  act  upon  my  own  opinion,  I  am  bound 
to  say  that  I  think  this  bond  is  contrary  to  public  policy,  and 
that  we  ought  to  give  judgment  for  the  defendant. 

Judgment  for  defendant. 


^'l 


IN  THE  EXCHEQUER  CHAMBER 
(Feb.  20.) 


The  plaintiff  below  alleged  error  in  the  above  judgment. 
The  defendant  denied  the  allegation. 

The  case  was  argued  in  last  Michaelmas  Term  [November 
16th,  1855.  Before  Williams,  Crowder,  and  Willes,  Js.,  and 
Parke,  Alderson,  and  Platt,  Bs.]  and  Vacation.  [November 
29th,  1855.    Before  the  same  Judges,  and  Cresswell,  J.] 

COWLING,  for  the  party  alleging  error  (plaintiff  below). 
The  plea  containing  no  averment  of  fact,  but  relying  on  what 
appears  upon  the  face  of  the  bond  and  condition  as  set  out,  the 
facts  recited  must  be  assumed  to  be  true.  It  does  not  appear 
that  the  obligors  comprehend  all  the  cotton  manufacturers  in 
the  neighborhood  of  Wigan  and  Hindley.  It  is  shown  that  the 
association  is  purely  defensive,  and  that  its  object  is  to  liberate 
the  trade  from  a  control  by  a  combination  of  workmen.  Such 
an  object,  at  any  rate,  is  not  merely  legal  but  praiseworthy. 
That,  it  is  true,  would  not  constitute  a  defense  of  the  proceed- 
ing if  the  object  were  to  be  furthered  by  illegal  means.  But 
no  such  means  appear.  The  number  of  the  obligors  is  eighteen ; 
but  the  obligation  is  not  less  legal  than  it  would  be  if  there 


THE  COI\mON  LAW  271 

were  only  three.    Nor  can  any  objection  be  urged  against  tlie 
duration  of  the  obligation  for  twelve  months  which  would  not 
be  valid  if  it  were  to  last  only  for  three.    It  is  not,  properly 
speaking,  a  bond  in  restraint  of  trade :  there  is  no  agreement 
either  to  give  up  or  to  suspend  trade:  that  could  have  been 
done  without  any  agreement.    The  trade  is  already  suspended 
or  checked ;  and  the  agreement  is  entered  into  for  the  purpose 
of  enabling  it  to  go  on  freely.     [Alderson,  B.— If  the  agree- 
ment had  merely  the  effect  of  closing  all  the  mills  when  there 
was  a  strike  against  a  single  mill,  that  should  be  shown:  all 
that  appears  is  that  the  steps  to  be  taken  were  at  the  discretion 
of  the  majority.]     The  majority  even  of  the  obligors  could  not, 
under  this  agreement,  suspend  the  trade  for  more  than  a  few 
months.     Nor  is  it  to  be  necessarily  inferred  that  any  suspen- 
sion will  take  place  at  all.     [Alderson,  B. — Do  you  say  that, 
if  there  were  no  combination  among  the  workmen,  this  asso- 
ciation would  be  legal?     If  not,  can  one  illegality  cure  an- 
other?]    An  illegal  act  may  well  render  that  legal  which  would 
be  otherwise  illegal,  just  as  a  poison  may  act  as  an  antidote  to 
another  poison.      [Alderson,  B. — May  you  poison  another  be- 
cause he  means  to  poison  you?]     What  acts  medicinally  is  no 
poison  at  all.    The  plea  of  son  assault  demesne  is  a  good  answer 
to  an  action  for  an  assault,  because  a  blow  struck  in  pure  self- 
defense  is  not  a  battery.     It  appears  that  Crompton,  J.,  was 
much  impressed  by  the  circumstance  that  every  obligor  here 
gives  up  his  private  judgment  in  deference  to  that  of  the  ma- 
jority.   But  why  should  he  not?    He  could  not  if,  by  his  doing 
so,  trade  was  restrained:  but  the  contrary  appears  on  this 
record.    The  association  is  for  doing  away  with  that  restraint 
of  trade  which  would  otherwise  be  affected  by  the  combined 
workmen  coercing  the  single  employers  in  succession.    A  joint 
resistance  to  this  can  be  secured  only  by  union ;  and  it  is  essen- 
tial to  a  union  that  it  should  be  governed  by  the  discretion  of 
the  majority.     A  partnership  is  guided  by  the  will  of  the  ma- 
jority of  partners.     The  public  benefit  is  more  likely  to  be 
secured  by  the  government  of  a  majority  than  by  that  of  a 
minority.    In  Mallan  v.  May,  11  M.  &  W.  653,  where  the  cov- 
enant was  held  partly  good  and  partly  bad,  as  being  in  restraint 
of  trade,  the  Court  said  that  circumstances  may  exclude  the 
presumption  that  a  partial  restraint  of  trade  is  bad;  adding: 


272    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

"If  there   are   circumstances  recited   in   the   instrument    (or 
probably  if  they  appear  by  averment),  it  is  for  the  Court  to 
determine  whether  the  contract  be  a  fair  and  reasonable  one 
or  not;  and  the  test  appears  to  be,  whether  it  be  prejudicial  or 
not  to  the  public  interest,  for  it  is  on  grounds  of  public  policy 
alone  that  these  contracts  are  supported  or  avoided."     The 
same  doctrine  may  be  collected  from  Egerton  v.  Earl  Brown- 
low,  4  H.  L.  Ca.  1,  and  is  laid  down  in  Mitchel  v.  Reynolds,  1 
P.  Wms.  186.     [See  note  to  S.  C,  1  Smith's  Lea.  Ca.  301  (4th 
ed.).]     In  the  instance  of  trading  guilds,  the  majority  had  the 
control.      [Alderson,  B. — They  were  founded  by  the  Crown.] 
Not  invariably;  there  were  voluntary  guilds.     And  there  are 
many  instances  of  associations  acting  with  a  public  object,  in 
which  the   majority  governs.     Such  is   the   Stock   Exchange 
Committee.     Of  course  the  plaintiff  does  not  contend  that  the 
mere  fact  that  the  contract  is  not  criminal  is  sufficient  to  show 
that  it  may  be  enforced  in  law.      [Alderson,  B. — Suppose  a 
set  of  manufacturers  entered  into  a  bond  conditioned  for  keep- 
ing their  mills  closed  during  the  prevalence  of  cholera.]     That 
could  not  be   illegal.      [Alderson,   B. — Suppose   the  condition 
were  for  obeying  the  regulations  of  a  sanitary  committee?] 
Why  should  that  not  be  done?    There  can  be  no  prejudice  to 
public  interests  from  the  selection  of  a  competent  directing 
authority.    Joint  owners  of  a  ship  ordinarily  contract  for  the 
employment  of  the  ship  according  to  the  will  of  the  majority. 
Parties  may  agree  to  be  bound  by  the  award  of  an  arbitrator 
or  the  certificate  of  an  engineer;  and  the  agreement  will  be 
enforced.     Crompton,  J.,  appears  to  have  considered  that  this 
I  is  in  the  nature  of  a  combination  to  lower  wages;  but  it  is  in 
fact  a  combination  for  putting  down  a  strike.     The  language 
of  Grose,  J.,  in  Rex.  v.  IMawbey,  6  T.  R.  636,  has  been  referred 
to.    But,  when  that  case  was  before  the  Court,  the  law  was  not 
as  it  is  now:  the  Legislature  had  in  numerous  instances  fixed 
the  rate  of  wages:  a  combination  for  the  purpose  of  raising 
wages  was  then  illegal;  Rex  v.  Journeymen  Tailors  of  Cam- 
bridge, 8  Mod.  11.    In  Stat.  23  Ed.  3,  cc.  1,  2,  3,  are  found  early 
restraints  of  this  kind ;  a  later  act,  stat.  5  Eliz.  c.  4,  §  15,  which 
was  before  the  Court  in  Rex  v.  Hulcott,   6  T.  R.  583,  was 
repealed  by  stat.  53  G.  3,  c.  40.     [Other  clauses  were  repealed 
by  stat.  54  G.  3,  c.  96.]      Numbers  of  similar  statutes  are 


THE  COIVOION  LAW  273 

repealed  by  stats.  5  G.  4,  c.  95,  and  6  G.  4,  c.  129.  The  modem 
policy  of  the  Legislature  may  be  collected  from  a  speech  of 
Mr.  Hiiskisson,  made  at  the  time  when  the  matter  was  under 
the  consideration  of  a  committee  of  the  House  of  Commons. 
[13  Hansard's  Parliamentary  Debates,  N.  S.  354,  5.]  The 
object  has  certainly  been  to  allow  of  combinations,  but  to  check 
unjustifiable  dictation.  The  language  of  Rolfe,  B.,  in  Regina 
V.  Selsby,  [note  (a)  to  Rowlands'  Case,  2  Den.  C.  C.  B.  384] 
and  of  Erle,  J.,  on  the  trial  of  Regina  v.  Rowlands,  [note  (b) 
to  Regina  v.  Rowlands,  17  Q.  B.  686  (E.  C.  L.  R.  vol.  79) ;  2 
Den.  C.  C.  R.  388,  note  (a)]  asserts  the  legality  of  combinations 
to  raise  wages,  and  is  not  confined  to  the  question  of  the  legal 
criminality  of  such  combinations.  [Anderson,  B. — In  one  of 
the  prohibitory  statutes,  39  and  40  G.  3,  c.  106,  §  1,  the  contract 
is  made  void :  that  is  rather  in  your  favor,  as  showing  that  the 
contract  was  not  void  at  common  law.  [Crowder,  J. — Was 
there  any  necessity  here  for  the  time  being  so  defined  that  it 
might  continue  after  the  combination  of  the  workmen  should 
be  at  an  end?]  It  is  not  easy  to  say  when  a  combination  is  at 
an  end ;  and,  if  no  limit  were  named,  the  agreement  would  be 
objectionable  as  being  perpetual.  [Alderson,  B. — Could  a  suit 
be  maintained  against  a  workman,  in  a  county  court,  for 
breach  of  the  agreement  to  combine,  on  the  ground  that  the 
agreement  was  a  measure  of  defense  against  a  combination  of 
masters?]  The  judge  would  decide,  as  matter  of  fact,  whether 
it  was  a  defensive  measure.  [Al,derson,  B. — Suppose  twenty 
electors  enter  into  a  bond  to  vote  for  a  particular  candidate, 
on  the  ground  that  there  is  a  similar  combination  in  favor  of 
the  opposite  candidate.]  That  is  a  breach  of  what  the  law 
considers  a  duty,  namely,  giving  a  free  vote. 

Mellish,  contra.  The  question  is,  not  whether  such  a 
contract  is  punishable  criminally,  but  whether  it  can  be  en- 
forced. Whether  it  operates  in  restraint  of  trade  must  be 
determined,  not  from  the  object  of  the  transaction,  but  from 
the  effect  of  the  instrument  itself.  Every  stipulation  in  the 
condition  is  in  restraint  of  trade.  There  does  not  appear  to  be 
any  power  given  to  the  majority  enabling  them  to  compel  an 
obligor  to  keep  his  mill  open,  or  to  give  wages  up  to  a  certain 
amount;  they  can  compel  only  the  closing  of  the  mills  and 

KalfiS  B.  of  T.  Vol.  1—18 


274    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

keeping  the  wages  down.  That  construction  follows  from  the 
recital  of  the  supposed  evil  which  was  to  be  met.  There  is  no 
consideration  here  besides  the  mutual  restraint :  and  that  dis- 
tinguishes this  from  all  the  cases  where  there  has  been  an 
independent  consideration ;  and  the  same  distinction  shows 
that  analogies  drawn  from  contracts  of  partnership  are  in- 
applicable. If  this  agreement  be  lawful  on  the  part  of  the 
masters,  a  similar  counter  agreement  would  be  lawful  on 
the  part  of  the  workmen.  The  record  does  not  show  that  the 
workmen  have  combined  in  this  way.  What  the  "other  in- 
juries" are  does  not  appear:  and  the  assertion  that  money  has 
been  arbitrarily  levied  and  extorted  is  too  vague.  The  plea 
of  son  assault  demesne  relies  upon  the  right  of  self-defense. 
[Alderson,  B. — It  sets  up  an  excuse  for  an  act;  that  is  all.] 
Assuming,  however,  that  an  exactly  similar  combination  existed 
among  the  workmen;  it  would  be  much  better  that  it  should 
not  be  enforced  on  either  side  than  that  it  should  be  enforced 
on  both  sides.  Such  contracts  are  entered  into  in  moments  of 
irritation  and  passion;  and  it  is  very  important  that  parties 
should  not  be  bound  by  them.  Are  they  to  be  enforced  in 
equity,  by  a  decree  for  specific  performance?  [Parke,  B. — 
Courts  of  Equity  have  a  discretion  which  we  have  not.]  The 
discretion  would  be  exercised  only  on  the  supposition  that  the 
contract  was  contrary  to  general  policy:  that  supposition  is 
enough  to  support  the  argument  for  the  defendant.  The  object 
of  Stat.  6  G.  4,  c.  129,  was  to  set  trade  and  work  free ;  and  it  is 
with  that  view  entirely  that  the  restrictive  statutes  are  re- 
pealed ;  though  it  is  remarkable  that  section  2  assumes  2  Stat. 
33  ed.  1  to  contain  enactments  respecting  trade  or  workmen, 
which  is  not  the  fact.  But  the  provisions  of  stat.  6  G.  4,  c.  129, 
go  no  further  than  to  exempt  the  combinations  there  mentioned 
from  punishment.  Nor  is  there  any  reference  to  agreements  to 
submit  to  the  direction  of  a  majority.  The  doctrine  laid  down 
in  Mitchel  v.  Reynolds,  1  P.  Wms.  181,  and  other  cases,  that  a 
restraint  of  trade  may  be  upheld  where  there  is  a  good  con- 
sideration for  it,  is  entirely  inapplicable  to  a  case  where  the 
restraint  is  itself  the  consideration.  That  a  contract  may  be 
void,  as  being  in  restraint  of  trade,  because,  though  properly 
limited  as  to  time,  it  is  not  limited  as  to  space,  appears  from 
Ward  V.  Byrne,  5  M.  &  W.  548.    The  judges  must  determine 


THE  COMMON  LAW  275 

whether  the  contract  is,  from  its  nature,  contrary  to  public 
policy,  as  in  Egerton  v.  Earl  Brownlow,  4  II.  L.  Ca.  1.  [Parke, 
B. — Suppose  parties  entered  into  a  bond  not  to  cultivate  their 
land  otherwise  than  might  be  agreed  upon  at  a  meeting  of  the 
obligors;  or  not  to  marry  without  leave  of  the  majority.]  Such 
bonds  could  not  be  enforced.  [Parke,  B. — Covenants  against 
marriage  are  discussed  in  Low  v.  Peers,  Wilmot's  Notes,  364. 
In  Exch.  Ch.  affirming  the  judgment  of  K.  B.  in  Lowe  v.  Peers, 
4  Burr.  2225.] 

Cowling,  in  reply.  Since  Hitchcock  v.  Coker,  6  A.  &  E. 
438  (E.  C.  L.  R.  vol.  33),  the  notion,  that  the  contract  is  to  be 
upheld  or  not  according  as  the  Court  thinks  the  consideration 
adequate  or  not,  has  been  exploded.  Cases  are  collected  in 
note  (a)  to  Hunlocke  v.  Blacklowe,  2  Wms.  Saund.  156a.  The 
record  fully  shows  a  combination  of  workmen  for  opposing 
which  this  contract  was  entered  into.  The  evils  suggested  in 
the  argument  on  the  other  side  arise,  not  from  such  contracts 
as  this,  but  from  the  combinations  which  it  is  intended  to  ob- 
viate. 

Cur.  adv.  vult. 

ALDERSON,  B,,  now  delivered  the  judgment  of  the  Court. 

This  was  an  action  by  which  the  plaintiff  sought  to  enforce  a 
bond  against  the  defendant.  The  condition  of  the  bond  recited 
that  the  defendant  and  seventeen  other  obligors,  being  re- 
spectively owners  and  occupiers  of  mills  and  other  premises  in 
Wigan  and  the  neighborhood,  carried  on  their  business  of 
spinners  and  weavers  of  cotton  yarn  and  cloth,  and  employed 
many  workpeople  and  servants;  and  that  certain  societies  or 
combinations  subsisted  in  the  neighborhood  amongst  divers 
persons,  whereby  persons  willing  to  be  employed  were  deterred 
by  a  reasonable  fear  of  social  persecution  and  other  injuries 
from  hiring  themselves  to  work  at  the  said  establishments ;  and 
that  thereby  the  legal  control  of  the  obligors  over  their  prop- 
erty and  establishments  was  injuriously  interfered  with;  and 
that  these  combinations  were  sustained  by  funds  arbitrarily 
levied  and  extracted  from  the  workmen  employed  by  the 
obligors  and  receiving  wages  from  them;  and  that  it  was 
neeessary  to  take  measures  for  vindicating  their  legal  rights 


276    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

to  the  control  and  management  of  their  own  i)roperty,  which 
would  best  sustain  the  rights  of  the  laborer  to  the  free  disposal 
of  his  skill  and  industry:  and  that,  to  effect  this,  the  obligors 
had  agreed  to  carry  on  their  works  in  regard  to  the  amount  of 
wages  to  the  laborer  to  be  employed  therein,  and  the  times  and 
periods  of  the  engagements  of  workpeople,  and  the  hours  of 
work,  and  the  suspending  of  work,  and  the  general  discipline 
of  their  works  and  establishments  (in  conformity  to  law)  for 
the  period  of  twelve  months  from  the  date  of  the  bond,  in  con- 
formity with  the  resolutions  of  a  majority  of  the  said  obligors 
present  at  any  meeting  to  be  convened  as  therein  mentioned; 
and  that,  for  that  purpose,  they  had  entered  into  the  bond ;  and 
the  condition  of  the  bond  was  therein  stated  to  be  that,  if  the 
several  obligors  and  their  partners  should  so  carry  on  their 
works  for  twelve  months  in  conformity  with  the  resolutions  of 
such  majority,  the  bond  as  to  £500,  in  which  each  was  to  be 
bound,  should  be  void ;  otherwise  to  be  in  full  effect.  The  plea 
concluded  with  an  averment  that,  save  as  aforesaid,  there  was 
no  consideration  for  execution  of  the  bond  by  defendant ;  and 
that  the  bond  was  in  restriction  of  trade,  and  illegal  and  void. 

To  this  plea  there  was  a  demurrer.  And,  on  its  being  argued 
before  the  judges  of  the  Court  of  Queen's  Bench,  the  majority 
of  that  Court  gave  judgment  in  favor  of  the  plea.  We  are  of 
opinion  that  the  judgment  was  right,  and  ought  to  be  affirmed. 

The  question  is,  whether  this  is  a  bond  in  restraint  of  u'ade : 
and  we  think  it  is  so.  Prima  facie,  it  is  the  privilege  of  a 
trader  in  a  free  country,  in  all  matters  not  contrary  to  law,  to 
negulate  his  own  mode  of  carrying  it  on  according  to  his  own 
discretion  and  choice.  If  the  law  has  in  any  matter  regulated 
or  restrained  his  mode  of  doing  this,  the  law  must  be  obeyed. 
But  no  power  short  of  the  general  law  ought  to  restrain  his 
free  discretion.  Now  here  the  obligors  to  this  bond  have  clearly 
put  themselves  into  a  situation  of  restraint. 

First:  Each  of  them  is  prevented  from  paying  any  amount 
of  wages  except  such  as  the  majority  may  fix,  whatever  may 
be  the  circumstances  of  the  work  to  be  done  and  his  own  opin- 
ion there  on.  Secondly,  they  can  only  employ  persons  for  such 
times  and  periods  as  the  majority  may  fix  on,  however  much 
the  minority  may  deem  it  for  their  own  interest  to  do  other- 
wise.   The  hours  of  work,  the  suspending  of  work,  partially  or 


THE  COMMON  LAW  277 

altogether,  the  discipline  and  management  of  their  establish- 
ments, is  to  be  regulated  by  others  forming  a  majority,  and 
taken  from  every  individual  member.  And  all  this  for  a  fixed 
period  of  twelve  months.  All  these  are  surely  regulations 
restraining  each  man's  power  of  carrying  on  his  trade  accord- 
ing to  his  discretion,  for  his  own  best  advantage,  and  therefore 
are  restraints  on  trade  not  capable  of  being  legally  enforced. 

We  do  not  mean  to  say  that  they  are  illegal,  in  the  sense  of 
being  criminal  and  punishable.  The  case  does  not  require  us ; 
and  we  think  we  ought  not  to  express  any  opinion  on  that 
point. 

But  then  it  is  said  that  these  regulations,  otherwise  illegal, 
are  prevented  from  being  so  considered  by  the  circumstances 
against  which  they  were  intended  to  operate.  It  appears  that 
a  counter  combination  existed  on  the  part  of  certain  workmen, 
and  that  the  alleged  object  of  this  bond  was  to  counteract  this, 
and  to  set  the  willing  and  industrious  workmen  free  from  its 
powers.  But,  supposing  this  to  be  the  object,  and  that  we  may 
even  consider  it  as  laudable,  we  cannot  agree  that  it  is  laudable 
or  right  to  use  such  means  of  counteraction.  The  maxim  in- 
juria 11011  excusat  injuriam  is  a  sound  one,  both  in  common 
sense  and  at  common  law.  This  is  only  to  put  one  wrong  as 
counterbalancing  another  wrong,  to  place  the  industrious  work- 
man in  the  fearful  situation  of  being  oppressed  by  a  majority 
of  masters  in  order  to  prevent  him  from  being  oppressed  by  a 
majority  of  his  fellow-workmen.  And,  besides,  here  it  is  to  be 
observed  that  the  masters'  combination  is  not  limited  to  the 
duration  of  the  suggested  combination  of  the  workmen.  It  is  to 
last  for  twelve  months  absolutely :  so  that,  if  the  combinations 
assigned  as  the  excuse  for  it  broke  up,  as  they  almost  always 
do,  in  a  short  period,  this  restraint  upon  the  obligors  would 
still  continue  in  force  after  the  object  against  which  it  seems 
to  have  been  directed  had  long  ceased  to  exist. 

This  bond,  therefore,  if  not  altogether  illegal  and  punishable, 
is  framed  to  enforce  at  all  events  a  contract  by  which  the 
obligors  agree  to  carry  on  their  trade,  not  freely  as  they  ought 
to  do,  but  in  conformity  to  the  will  of  others;  and  this,  not 
being  for  a  good  consideration,  is  contrary  to  the  public  policy. 
We  see  no  way  of  avoiding  the  conclusion  that,  if  a  bond  of 
this  sort  between  masters  is  capable  of  being  enforced  at  law. 


278    COMBINATIONS  AND  RESTRAINT  OF  TRADED 

an  agreement  to  the  same  effect  amongst  workmen  must  be 
equally  legal  and  enforceable :  and  so  we  shall  be  giving  a  legal 
effect  to  combinations  of  workmen  for  the  purpose  of  raising 
wages,  and  make  their  strikes  capable  of  being  enforced  at  law. 
We  think  that  the  Legislature  have  been  contented  to  make 
such  strikes  not  punishable :  and  certainly  they  never  contem- 
plated them  as  being  the  subject  of  enforcement  by  a  suit  at 
law,  on  the  part  of  the  body  of  delegates,  against  any  workmen 
who  might  have  been  seduced  by  some  designing  person  to  sign 
an  engagement  with  penalty  to  continue  in  the  strike  as  long 
as  a  majority  were  for  holding  out. 

We  think,  for  these  reasons,  that  the  judgment  of  the  Court 
of  Queen's  Bench  is  right  and  ought  to  be  affirmed. 

Judgment  affirmed. 


^ 


l(^^  s  c    "^         HORNBY  V.  CLOSE 

^\     .    ,ji<^^         (Queen's  Bench,  1866.    L.  R.  2  Q.  B.  153.) 

^^    tiase  stated  by  justices  of  the  west  riding  of  Yorkshire  under 
■  -    ^^^20  and  21  Vict.  c.  43. 

"^^  'An  information  was  laid  on  the  12th  of  January,  1866,  at 
Bradford,  in  the  said  riding,  by  John  Hornby  (the  appellant), 
boilermaker,  the  president  of  the  Bradford  Branch  Society  of 
the  United  Order  of  Boilermakers  and  Iron  Shipbuilders,  on 
behalf  of  the  said  society,  a  copy  of  the  rules  of  which  society 
have  been  duly  deposited  with  the  register  of  friendly  societies 
in  England,  pursuant  to  the  statute,  charging  that  Charles 
Close  (the  respondent),  boilermaker,  on  the  16th  of  December, 
1865,  at  Bradford  aforesaid,  being  then  and  there  a  member  of 
the  said  society,  and  having  in  his  possession  certain  moneys 
of  the  said  society,  amounting  to  £24,  18s.  Si^d.,  did  then  and 
there  unlawfully  withhold  the  same  from  the  said  society, 
contrary  to  the  form  of  the  statute  (18  and  19  Vict.  c.  63,  §  24). 

A  summons  upon  the  above  information  was  issued,  and  on 
the  hearing  the  charge  against  the  respondent,  as  laid  in  the 
information,  was  fully  proved. 

A  copy  of  the  "Rules  and  Regulations  of  the  United  Society 
of  Boilermakers  and  Iron  Shipbuilders  of  Great  Britain  and 


THE  COEOION  LAW  279 

Ireland"  was  put  in,  and  admitted  to  be  correct.  A  copy  of 
such  rules  was  transmitted  with  the  case.  The  following  was 
the  title-page  of  the  rules:  "Rules  and  regulations  to  be 
observed  and  strictly  enforced  by  the  United  Society  of  Boiler- 
makers and  Iron  Shipbuilders  of  Great  Britain  and  Ireland. 
Instituted  for  the  purpose  of  mutual  relief  of  its  members  when 
out  of  employment,  the  relief  of  their  sick,  and  burial  of  their 
dead,  and  other  benevolent  purposes,  as  inserted  in  their  rules." 

Rule  1,  after  repeating  the  purpose  of  the  society  as  set  out 
in  the  title-page,  by  section  3,  "It  shall  consist  of  an  unlimited 
number  of  members,  being  persons  legally  working  at  the  trade 
of  boilermaking  and  iron  shipbuilding,  and  residing  in  any 
part  of  Great  Britain  or  Ireland." 

Rules  2-9  related  to  the  officers,  their  duties  and  salaries, 
consisting  of  president,  stewards  (each  of  whom,  by  rule  3, 
§  2,  is  to  visit  the  sick  members  twice  in  each  week,  on  separate 
days),  guardians  and  marshal,  secretary,  treasurer,  trustees, 
auditors,  and  committee. 

By  rule  11,  §  1,  no  person  shall  be  admitted  a  member  who 
is  not  a  legal  boilermaker  or  iron  shipbuilder,  or  under  twenty 
years  of  age;  but  every  competent  person  applying  shall  be 
admitted,  on  payment  of  an  entrance  fee  of  7s.  6d.  to  £1,  ac- 
cording to  age,  and  a  subscription  of  3s.  6d.  every  four  weeks ; 
section  2,  the  person  proposed  must  have  worked  not  less  than 
five  years  at  the  trade. 

Rule  15,  Relief  to  be  given  to  sick  members  for  first  twenty- 
six  weeks,  10s.  per  week;  second  twenty-six  weeks,  5s.;  and 
after  this,  4s,  per  week. 

Rule  20,  §  1.  Any  free  and  full  member  thrown  out  of  em- 
ployment through  depression  in  trade,  or  circumstances  satis- 
factory to  the  members  of  this  branch,  shall  receive  a  traveling 
card  or  certificate,  etc.  Section  2,  The  traveling  relief  to  be 
Is.  8d.  for  each  of  the  six  working  days. 

Rule  22,  §  1.  Any  member,  disabled  by  loss  of  sight  or  limb, 
to  receive  a  bonus,  if  he  has  paid  for  twelve  months,  £10 ;  for 
two  years,  £20;  for  three  years,  £30;  for  four  years,  £40;  for 
five  years,  £50 ;  for  six  years,  £60. 

Rule  23.  A  superannuated  member  who  shall  have  sub- 
scribed for  eighteen  years  and  be  aged  fifty,  to  receive  5s.  per 
week  for  life. 


280    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Rule  25,  §  1,  makes  provision  as  to  the  funeral  of  members 
and  their  wives,  viz.,  £12  on  the  death  of  a  member,  and  £6  on 
the  death  of  his  vnfe. 

It  was  contended  for  the  respondent,  that  the  society  was  not 
a  society  within  section  44  of  the  18  and  19  Vict.  c.  63 ;  and  fur- 
ther, that  it  was  a  society  established  for  purposes  which  are 
illegal,  being  against  public  policy,  in  restraint  of  trade,  and 
depriving  the  workman  of  the  free  exercise  of  his  own  will  in 
the  employment  of  his  labor,  and  also  in  restraining  him  from 
getting  employment  or  continuing  in  employment,  or  obtaining 
employment  for  a  non-member  of  the  society ;  and  lastly,  that 
the  society  was  an  organization  for,  or  tending  to,  the  encourag- 
ing and  maintaining  of  strikes. 

In  support  of  these  objections,  the  following  passages  in  the 
rules  and  regulations  of  the  society  were  relied  on : 

Rule  28.  Piece-work. — Piece-work  disputes  and  benefits 
from  contingent  fund.  Section  1.  That  in  districts  where  mem- 
bers are  compelled  to  ivorh  piece-work,  and  it  be  proved  to  the 
satisfaction  of  the  executive  council  that  the  firm  is  reducing 
the  prices  below  the  usual  and  reasonable  prices,  they  shall 
allow  the  men  resisting  the  reduction  7s.  per  week  for  two 
weeks,  after  being  out  six  days ;  after  which  they  shall  receive 
their  traveling  cards,  according  to  rule  20. 

Section  2.  That  any  member  or  members  in  a  shop,  either  on 
piece-work  or  day-work,  where  a  dispute  arises  connected  with 
our  trade  or  society,  no  member  or  members  shall  be  allowed  to 
call  at  such  shop  or  shops  after  being  made  acquainted  with 
such  dispute,  or  for  doing  so  to  be  fined  the  sum  of  10s.  And 
that  any  member  of  this  society,  either  angle-iron  smith,  plater, 
riveter,  or  holder-up,  encouraging  any  holder-up  or  laborer  to 
violate  this  rule,  by  allowing  him  to  practice  with  his  tools,  or 
otherwise  instructing  him  in  other  branches  of  the  trade  con- 
trary to  these  rules,  shall,  on  proof  thereof,  be  fined  for  the 
first  offense  5s.,  for  the  second  10s.,  and  for  the  third  to  be 
expelled  the  society. 

Rule  29.  Disputes  on  day-work  and  benefits.  Section  1. 
Should  a  dispute  arise  in  any  shop,  the  members  of  that  shop 
shall  make  it  known  to  their  branch,  which,  if  it  only  affects 
the  interest  of  two  or  three  members,  such  branch  to  have 
power  to  settle  it,  and  grant  to  members  wishing  to  travel  12s. 


THE  COIVmON  LAW  281 

cards,  or  12s.  per  week  donation.  But  should  a  general  dispute 
arise  in  any  shop,  which  cannot  be  amicably  settled  by  the 
branch,  it  shall  be  referred  to  the  executive  council,  who  shall 
give  them  instructions  on  the  subject.  All  members  losing  their 
employment  through  such  disputes,  after  being  sanctioned  by 
the  executive,  shall  receive  the  sum  of  12s.  per  week,  so  long 
as  they  remain  out  of  employment.  This  rule  to  be  applied  to 
all  disputes  excepting  the  settlement  of  piece-work  prices. 

Rule  42,  §  1  (part  of).  Any  member  using  his  influence  to 
obtain  employment  for  a  non-member,  shall  be  fined  for  such 
offense  10s. 

Rule  20,  §  4.  Any  member  leaving  his  employment,  on  his 
own  responsibility,  to  seek  for  other  employment,  shall  not  be 
entitled  to  traveling  relief  until  he  has  again  been  in  employ- 
ment one  month. 

The  justices  were  of  opinion  that  the  objections  urged  on 
behalf  of  the  respondent  were  valid ;  that  the  society  in  ques- 
tion was  not  within  the  44th  section  of  the  18  and  19  Vict.  c. 
63;  and  that  the  rules  of  society  in  question  showed  or  set 
forth  an  illegal  purpose ;  and  consequently  they  dismissed  the 
complaint. 

The  question  was,  whether  the  determination  upon  the  facts 
and  grounds  previously  stated  is  or  is  not  erroneous  in  point 
of  law. 

Hellish,  Q.  C.  (Mcnamara  with  him),  for  the  appellant. 
The  society  is  not  certified,  nor  could  it  have  been  certified  as 
a  friendly  society,  under  18  and  19  Vict,  c.  63,  but  its  rules 
have  been  deposited  with  the  registrar;  and  the  question  is, 
whether  it  is  a  society  within  section  44,  so  as  to  be  able  to  avail 
itself  of  section  24.3 1 

31 — 18  and  19  Vict.  c.  63,  §  9.  "  It  money  to  be  paid  on  the  birth  of  a 
shall  be  lawful,  for  any  number  of  member's  child,  or  on  the  death  of 
persons  to  form  and  establish  a  a  member,  or  for  the  funeral  ex- 
friendly  society,  under  the  provi-  penses  of  the  wife  or  child  of  a 
sions  of  this  act,  for  the  purpose  member.  2.  For  the  relief  or  main- 
of  raising  by  voluntary  subscrip-  tenance  of  the  members,  their  hus- 
tions  of  the  members  thereof,  with  bands,  wives,  children,  brothers  or 
or  without  the  aid  of  donations,  a  sisters,  nephews  or  nieces,  in  old 
fund  for  any  of  the  following  age,  sickness,  or  widowhood,  or  the 
objects:     1.    For  insuring  a  sum  of  endowment    of    members    or    nomi- 


282    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Section  9  defines  the  object  of  friendly  societies;  and  no 
doubt  when  section  44  speaks  of  a  society  "for  any  purpose," 
it  must  be  intended  any  analogous  purpose.  Now  it  cannot  be 
disputed  that  very  many  of  these  rules  are  strictly  for  benevo- 
lent objects  within  the  act.  Thus,  rule  3,  §  2,  as  to  visiting 
the  sick;  rule  15,  as  to  relief;  rule  20,  §§  1  and  2,  as  to  travel- 
ing relief  to  members  when  seeking  work  during  depression 
in  trade ;  rule  22,  as  to  bonus  to  disabled  members,  and  rule  23, 
superannuation  allowance  to  aged  members,  are  surely  all  pur- 
poses within  the  act.  And  the  rules  relied  upon  by  the  re- 
spondent are  not  sufficient  to  take  the  society  out  of  the  scope 
or  benefit  of  the  act.  The  objects  of  those  rules  are  not  illegal; 
they  are  not  illegal  at  common  law,  nor  made  so  by  the  act; 
and  even  if  they  are  void  as  in  restraint  of  trade,  on  the  prin- 
ciple of  Hilton  V.  Eckersley,  6  E.  &  B.  47,  66  (E.  C.  L.  R.  vol. 
88),  24  L.  J.  Q.  B.  353,  25  L.  J.  Q.  B.  199,  that  would  not  ren- 
der the  purpose  of  the  society  itself  illegal:  and  the  Court  of 
Queen's  Bench  and  Exchequer  Chamber  expressly  refrained 
from  saying  that  these  combinations  had  anything  criminal 
in  them. 

The  respondent  did  not  appear. 

rees  of  members  at  any  age.  ecutor,  administrator,  or  assignee  of 
3.  For  any  purpose  which  shall  be  a  member  thereof,  or  any  person 
authorized  by  a  Secretary  of  State,  whatsoever,  by  false  representation 
or  in  Scotland  by  the  Lord  Advo-  or  imposition,  shall  obtain  posses- 
cate,  as  a  purpose  to  which  the  sion  of  any  moneys,  securities, 
powers  and  facilities  of  this  act  books,  papers,  or  other  effects  of 
ought  to  be  extended  .  .  .  and  if  such  society,  or  having  the  same  in 
such  persons  so  intending  to  form  his  possession  shall  withhold  or  mis- 
and  establish  such  society  shall  apply  the  same,  or  shall  wilfully 
transmit  rules  for  the  government,  apply  any  part  of  the  same  to  pur- 
guidance,  and  regulation  of  the  same  poses  other  than  those  expressed  or 
to  the  registrar,  and  shall  obtain  directed  in  the  rules  of  such  so- 
his  certificate  that  the  same  are  in  ciety, "  jurisdiction  is  given  to  jus- 
conformity  with  law  as  hereinafter  tices  on  complaint  on  behalf  of  the 
mentioned,  then  the  society  shall  be  society  to  proceed  against  the  oflS- 
deemed  tO"  be  fully  formed  and  es-  cer  charged  in  manner  directed  by 
tablished  from  the  date  of  the  cer-  11  and  12  Vict.  c.  43,  and  to  order 
tificate. "  him  to  deliver  up  the  effects  of  the 
By  section  24:  "If  any  officer,  society,  or  to  repay  the  money  ap- 
member,  or  other  person,  being  or  plied  improperly,  together  with  a 
representing  himself  to  be  a  member  penalty  not  exceeding  201.,  and  in 
of  such  society,  or  the  nominee,  ex-  default    to    imprison    him    with    or 


THE  COIVIMON  LAW  283 

COCKBURN,  C.  J.  "We  ought  not  to  hesitate  a  moment  in 
saying  that  we  think  the  magistrates  were  perfectly  right  in 
holding  that  this  society  did  not  come  within  the  operation 
of  the  Friendly  Societies  Act,  so  as  to  give  the  magistrates 
jurisdiction.  I  quite  agree  with  Mr.  Mellish  that,  supposing 
the  main  purpose  of  the  society  were  within  the  9th  section, 
as  being  benevolent,  it  would  not,  by  reason  of  one  or  two  of 
the  rules  being  beyond  that  purpose,  cease  to  be  a  society 
within  the  act.  It  is  therefore,  in  each  case,  material  to  in- 
quire what  the  purposes  of  the  society  were.  Here  we  find 
the  very  purposes  of  the  existence  of  the  society  not  merely 
those  of  a  friendly  society,  but  to  carry  out  the  objects  of  a 
trades'  union.  Under  that  term  may  be  included  every  com- 
bmation  by  which  men  bind  themselves  not  to  work  except 
under  certain  conditions,  and  to  support  one  another,  in  the 
event  of  being  thrown  out  of  employment,  in  carrying  out 
the  views  of  the  majority.  I  am  very  far  from  saying  that  the 
members  of  a  trades'  union  constituted  for  such  purposes 
would  bring  themselves  within  the  criminal  law ;  but  the  rules 
of  such  a  society  would  certainly  operate  in  restraint  of  trade, 
and  would  therefore,  in  that  sense,  be  unlawful;  and  on  the 

without  hard  labour  for  a  term  not  a  copy  of  such  rules  shall  have  been 

exceeding  three  months;  with  a  pro-  deposited   with   the   registrar,   every 

viso  that  the  society  may,  neverthe-  dispute    between    any    members    of 

less,  proceed  by  indictment;  but  not  such  society  and  the  trustees,  treas- 

if  a  conviction  has  been  obtained.  urer,    or   other    officer,   or   the   com- 

By   section    40,    disputes   between  mittee    of    such    society,    shall    be 

members    and    the    officers    of    the  decided      in     manner     hereinbefore 

society    are    to    be    decided    in    the  provided   with    respect    to    disputes, 

manner  provided  by  the  rules,  which  and    the    decision    thereof,    in    the 

decision  shall  be  conclusive  without  case   of   societies   to   be   established 

appeal.      By   section   41,   where   the  under  this  act,  and  the  sections  (40, 

rules  do  not  provide  a  mode  of  set-  41)    in   this   act   provided   for   such 

tlement,    such    disputes    are    to    be  decision,  and  also  the  section   (24) 

decided  by  the  county  court.  in   this   act  which   enacts  a  punish- 

Section  44 :     "  In  the  case  of  any  ment  in  case  of  fraud  or  imposition 

friendly  society  established  for  any  by    an    officer,    member,    or    person, 

of  the  purposes  mentioned  in  section  shall   be    applicable    to    such   uncer- 

9,  or  for  any  purpose  which  is  not  tified  societies, ' '  with  a  proviso  that 

illegal,    having    written    or    printed  an  uncertified  society  shall  have  no 

rules,    whose    rules    have    not    been  other   of   the   advantages   conferred 

certified  by  the  registrar,   provided  by  the  act. 


284    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

principle  on  which  the  Court  of  Error,  in  Hilton  v.  Eckersley, 
affirming  the  decision  of  this  Court,  held  that  a  bond,  given 
by  masters  to  observe  rules  in  their  business  which  were  in 
restraint  of  trade,  was  so  far  illegal  that  it  could  not  be  en- 
forced in  a  court  of  laAv,  we  hold  that  these  rules  of  a  society 
of  workmen  being  in  restraint  of  trade  are  also  so  far  illegal ; 
that  is  to  say,  when  we  find  one  of  the  main  objects  of  a  society 
is  that  of  a  trades'  union,  many  of  its  rules  being  in  restraint 
of  trade,  so  that  if  an  action  were  brought  to  enforce  a  civil 
right  in  respect  of  any  of  them  they  would  be  held  not  en- 
forceable at  law,  in  the  same  sense  we  hold  the  society  is  not 
"for  a  purpose  which  is  not  illegal,"  and  so  not  within  the 
act.  Therefore,  for  these  two  reasons  we  hold  the  present 
society  not  within  section  44 ;  first,  because  it  is  for  a  purpose 
not  analogous  to  that  of  a  benevolent  or  friendly  society  such 
as  is  mentioned  in  section  9 ;  and  secondly,  because  those  rules, 
although  they  may  not  be  illegal  in  the  sense  of  bringing  the 
parties  to  them  within  the  criminal  law,  are  in  restraint  of 
trade,  and  so  far  illegal. 

BLACKBURN,  J.  I  am  of  the  same  opinion.  The  magis- 
trates had  no  jurisdiction,  unless  the  society  was  within  section 
44,  which  extends  certain  of  the  clauses  of  the  act  to  a  friendly 
society  whose  rules  have  been  deposited  but  not  certified,  being 
"a  friendly  society  established  for  any  of  the  purposes  men- 
tioned in  section  9,  or  for  any  purpose  which  is  not  illegal." 
Mr.  Mellish  very  properly  admitted  that  "any  purpose"  must 
be  confined  to  any  purpose  analogous  to  those  mentioned  in 
section  9;  for  a  literal  construction  of  any  purpose  whatever 
would  be  contrary  to  all  rules  of  interpretation.  And  the  first 
question  is,  is  this  society  for  any  analogous  purpose?  Now, 
as  the  Lord  Chief  Justice  has  said,  the  purposes  of  a  trades' 
union  are  clearly  not  analogous  to  those  of  a  friendly  society.  A 
little  deviation  from  the  strict  purpose  of  a  friendly  society 
might  not  take  the  society  out  of  the  scope  of  the  act;  but 
here  a  main  object  certainly — if  not  the  main  object,  I  think 
the  main  object — was  that  of  a  trades'  union,  and  therefore 
the  magistrates  were  fully  justified  in  declining  to  act.  Sec- 
ondly, I  go  further,  and  think  the  rules  illegal  in  the  sense 
of  void,  according  to  the  principle  of  Hilton  v.  Eckersley,  6 


THE  COMMON  LAW  285 

E.  &  B.  47,  66  (E.  C.  L.  R.  vol.  88),  24  L.  J.  Q.  B.  353,  25  L.  J. 
Q,  B.  199, — a  ease  of  combination  by  masters,  but  the  same 
principle  must  apply  to  combinations  of  men, — that  they  are 
not  enforceable  at  law.  The  Court  of  Exchequer  Chamber  in 
that  case  carefully  avoid  going  further,  and  saying  whether 
or  not  the  objects  of  the  masters  were  illegal  in  the  sense  of 
being  criminal;  and,  acting  on  the  authority  of  that  ease  in 
the  Exchequer  Chamber,  and  adopting  the  view  of  Cromp- 
TON,  J.,  in  the  court  below,  I  wish  to  guard  myself  from  being 
supposed  to  express  any  opinion  on  the  present  case.  I  do 
not  say  the  objects  of  this  society  are  criminal.  I  do  not  say 
they  are  not.  But  I  am  clearly  of  opinion  that  the  rules  re- 
ferred to  are  illegal,  in  the  sense  that  they  cannot  be  enforced; 
and  on  this  ground,  also,  I  think  the  society  not  within  section 
44,  as  not  being  "for  a  purpose  not  illegal."  Whatever  the 
inclination  of  my  opinion,  it  is  unnecessary  to  decide  whether 
illegality  of  any  of  the  rules  would  taint  the  whole,  because 
here  the  illegal  objects  formed  not  a  small  part,  but  a  princi- 
pal, if  not  the  whole,  object  of  the  society. 

MELLOR,  J.  I  am  also  of  the  same  opinion.  I  desire  to 
express  no  opinion  as  to  whether  the  rules  referred  to  are 
illegal  in  the  sense  of  being  criminal.  Some  of  the  substantial 
objects  of  the  society  are  those  of  a  trades'  union,  and  for 
the  maintenance  of  its  members  when  on  strike,  and  these 
objects  cannot  be  separated  from  the  other  objects,  if  any,  of 
the  society.  Nor  can  I  doubt  that  many  members  joined  the 
society  on  the  very  footing  that  there  were  such  rules  and  for 
the  very  sake  of  the  illegal  objects.  As  my  Lord  and  my 
Brother  Blackburn  have  said,  although  some  of  the  objects 
of  the  society  may  be  those  of  a  friendly  society,  yet  these 
other  and  substantial  objects  of  a  trades'  union  are  not  anal- 
ogous to  those  of  a  friendly  society,  not  being  benevolent ; 
and  the  rules  not  being  legal  in  the  sense  of  enforceable  at 
law,  on  the  principle  of  the  decision  in  Hilton  v.  Eckersley, 
the  society  was  not  within  the  act,  and  the  magistrates  had  no 
jurisdiction  over  the  case. 

LUSH,  J.  I  am  entirely  of  the  same  opinion.  One  main 
purpose  of  the  society,  if  not  the  main  purpose,  was  to  form  a 


286    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

trades'  union.     That  being  so,  the  purpose  of  the  society  was 
not  analogous  to  that  of  a  friendly  society ;  and  further,  this 
purpose  was  illegal,  in  the  sense  that  it  was  a  purpose  which 
could  not  be  enforced  in  a  court  of  law. 
Judgment  for  the  respondent. ^^ 


NORTH  WESTERN  SALT  CO.  v.  ELECTROLYTIC 
ALKALI  CO. 

(House  of  Lords,  1914.    L.  R.  [1914]  App.  Cas.  461.) 

Appeal  from  a  decision  of  the  Court  of  Appeal  reversing  a 
decision  of  Scrutton,  J.,  [1913]  3  K.  B.  422. 

The  following  statement  of  facts  is  taken  from  the  judg- 
ment of  the  Lord  Chancellor. 

"The  appellant  company  are  a  combination  of  salt  manu- 
facturers, and  they  are  alleged  to  include  substantially  the 
whole  of  the  salt  manufacturers  in  the  north-west  of  England, 
and  to  have  obtained  the  practical  control  of  the  inland  mar- 
ket in  England  for  the  sale  of  vacuum  salt,  stoved  and  un- 
stoved.  Stoved  salt  is  salt  which  is  used  for  household  purposes 
and  which  has  been  subjected  to  special  drying  processes  to 
fit  it  for  such  purposes.  Vacuum  salt  is  salt,  whether  after- 
wards stoved  or  not,  which  has  been  prepared  by  a  process  in 
which  the  waste  steam  from  the  works  is  carried  under  the 
salt  pans,  instead  of  fires  being  put  under  these  salt  pans. 

"The  contract  between  the  appellants  and  the  respondents, 
who  were  salt  manufacturers,  was  made  on  November  9,  1907. 
By  its  terms  the  respondents  agreed  to  sell  to  the  appellants 
72,000  tons  of  vacuum  salt,  of  which  12,000  were  to  be  stoved 
salt.  Delivery  was  to  spread  over  the  four  years  between 
January  1,  1908,  and  December  31,  1911,  in  about  equal  monthly 
quantities.  These  quantities  represented  18,000  tons  a  year, 
of  which  3,000  were  to  be  of  stoved  salt,  unless  the  respond- 
ents in  November  in  any  year  exercised  an  option  to  deliver 
unstoved  salt  only  in  the  following  year.    The  price  was  to  be 

32 — See  The  King  v.  Journeymen-  Q.  B.  602  (where  the  court  was 
Taylors  of  Cambridge,  8  Modern  11  evenly  divided)  ;  Old  v.  Robson,  62 
(1721);    Farrer    v.   Close,   L.   R.   4       L.  T.  N.  S.  282, 


THE  COlvmON  LAW  287 

85.  a  ton  for  both  kinds  of  salt,  delivered  into  trucks  at  the 
sellers'  works  or  into  craft  at  their  canal  wharf.  Stoved  salt 
was  to  be  loaded  in  bags,  to  be  provided  by  the  buyers,  but  to 
be  filled  and  stitched  at  the  expense  of  the  sellers.  The  sellers 
were  to  be  free  to  manufacture  other  salt  for  their  own  use, 
but  not  for  sale,  excepting  so  much  as  was  required  to  satisfy 
a  certain  current  contract.  The  sellers  were  to  have  the  option 
of  repurchasing  from  the  buyers  the  stoved  vacuum  salt  manu- 
factured by  themselves  to  the  extent  of  3,000  tons  annually 
at  the  buyers'  current  prices.  If  the  sellers  made  stoved 
vacuum  salt  they  were  to  be  elected  distributors  in  respect 
of  3,000  tons  annually,  on  the  same  terms  and  conditions  as 
the  buyers'  other  distributors.  The  sellers  agreed  not  to  lease 
or  sell  any  of  their  land  during  the  contract  for  salt  making 
or  boring  for  brine  for  salt  making,  but  they  might  sell  brine 
for  other  purposes  than  salt  making.  They  were  to  be  free 
to  reduce  or  cease  their  making  of  salt.  The  agreement  was 
to  be  taken  as  a  settlement  of  all  questions  arising  out  of  a 
previous  agreement  of  August  25,  1906. 

"There  were,  of  course,  other  salt  manufacturers,  and  these 
were  also  under  contract  to  sell  salt  to  the  appellants,  and 
they  acted  as  distributors  of  salt  for  the  appellants  under  an 
agreement  for  distribution,  the  terms  of  which  did  not  sub- 
stantially vary  during  the  period  covered  by  the  contract 
sued  on.  The  effect  of  these  terms  was  that  if  the  salt  manu- 
facturers exercised  their  option  to  repurchase  the  stoved  salt, 
and  then  resold  it,  they  would  have  to  pay  out  of  the  price 
they  received,  not  only  the  current  selling  prices,  but  certain 
amounts  which  they  might  receive  for  putting  the  salt  into 
bags  and  stitching  them,  and  the  amount  of  these  charges 
could  be  claimed  by  the  appellants  as  additions  to  their  current 
selling  price.  There  were  also  loading  and  other  charges,  the 
amounts  of  which  might  be  similarly  claimed. 

"The  appellants'  current  price  for  table  salt,  apart  from  all 
additions, — the  naked  price  as  it  was  called — was  fixed  on 
March  30,  1908,  at  18s.,  and  the  respondents  intimated  their 
exercise  of  the  option  to  repurchase.  Controversy  arose  as  to 
the  terms  and  effect  of  the  option  when  exercised,  and  as 
to  whether  the  respondents  were  bound  to  sign  a  distributors' 
agreement,  and  in  what  terms.    Meantime  the  respondents  be- 


288    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

gan,  in  breach  of  their  contract,  to  sell  stoved  salt  to  customers. 
They  appear  to  have  concealed  these  sales  from  the  appellants. 
The  latter,  however,  discovered  what  had  been  done  and 
claimed  damages. 

"In  the  event  the  present  action  was  brought.  In  their 
points  of  claim  the  appellants  simply  stated  the  contract  of 
November  9,  1907,  alleged  breaches,  and  claimed  damages. 
They  set  out  particulars  of  the  sales  alleged  to  have  been 
made  in  breach  by  the  respondents,  and  stated  the  character 
of  the  dispute  which  had  arisen  as  to  the  measure  of  damages. 
The  respondents'  points  of  defence  were  confined  to  a  denial 
of  the  alleged  breaches  as  regards  the  bulk  of  the  stoved  salt 
in  question.  The  case  made  was  that  they  had  in  substance 
repurchased  and  properly  sold  the  stoved  salt  in  question,  and 
that  they  had  duly  paid  or  brought  into  Court  all  the  money 
the  appellants  were  entitled  to.  As  to  another  and  smaller 
quantity  of  the  salt  in  controversy,  they  admitted  sales  in 
breach  of  contract,  but  disputed  the  measure  and  amount  of 
the  damages  claimed,  and  they  brought  into  Court  suras  which 
they  alleged  were  sufficient  to  satisfy  all  proper  claims.  In 
their  reply  the  appellants  joined  issue  generally,  and  alleged 
that  the  respondents  were  only  entitled  to  sell  salt  repurchased 
on  the  terms  contained  in  the  distributors'  agreement,  under 
which  they  ought,  as  a  preliminary  to  such  resale,  to  have 
lodged  with  the  appellants  the  contracts  for  sale.  This  it  was 
alleged  that  the  respondents  had  not  done,  and  the  appellants 
further  relied  on  certain  inland  conditions  which  were  issued 
in  accordance  with  the  distributors'  agreement,  and  with  which 
it  was  said  that  the  respondents  had  not  complied. 

"The  respondents  did  not  in  their  points  of  defence  set  up 
the  invalidity  or  non-enforceability  of  the  contract  of  Novem- 
ber 9,  1907,  and  it  was  admitted  at  the  Bar  that  it  was  through 
no  slip,  but  after  consideration,  that  this  was  not  done.  The 
only  questions  raised  by  the  pleadings  were,  firstly,  whether 
the  respondents  had  not  in  substance  repurchased  under  the 
option  in  the  contract,  and  then  properly  resold,  and,  secondly, 
as  to  the  measure  of  damages. 

"The  action  was  tried  in  the  Commercial  Court  before 
Scrutton,  J.  The  learned  counsel  for  the  respondents,  in 
the  course  of  cross-examining  one  of  the  appellants'  witnesses, 


THE  COMMON  LAW  2^9 

raised  the  point  as  to  the  legality  of  the  agreement.  Counsel 
for  the  appellants  objected  that  no  such  point  had  been 
pleaded.  Scrutton,  J.,  sustained  the  objection.  He  held  that 
unless  illegality  appeared  on  the  face  of  the  plaintiffs'  case 
the  point  could  not  be  put  in  cross-examination,  having  regard 
to  the  fact  that  no  such  point  was  raised  by  the  pleadings, 
pursuant  to  what  was  required  by  the  Rules  of  the  Supreme 
Court.  He  refused  to  leave  to  amend,  but  he  said  that  if, 
after  hearing  the  plaintiffs'  case,  he  was  satisfied  that  the 
claim  was  as  matter  of  law  illegal  or  unenforceable,  he  would 
be  bound  to  take  judicial  notice  of  this  and  to  disallow  the 
claim.  He  finally  gave  a  judgment  for  the  plaintiffs  on  the 
question  of  validity,  and  for  the  rest,  confined  it  to  the  other 
questions  which  I  have  indicated.  It  dealt  mainly  with  the 
measure  of  damages. 

"The  case  went  to  the  Court  of  Appeal,  where  a  majority 
of  the  Court,  consisting  of  Vaughan  Williams  and  Farwell, 
L.  JJ.,  held  that  the  contract  was  in  restraint  of  trade  and 
bad,  and  that  the  action  should  be  dismissed  with  costs. 
Kennedy,  L.  J.,  dissented.  The  Court  was  willing  to  grant  a 
new  trial,  if  both  parties  desired  it,  in  which  further  evidence 
as  to  the  circumstances  could  be  brought  forward,  but  the 
defendants  elected  to  take  a  final  judgment.  The  majority  of 
the  learned  judges  in  the  Court  of  Appeal  held  that  the  con- 
tract sued  on  must  be  read  in  connection  with  the  distributors' 
agreement,  and  that  this  agreement  must  be  read  as  connected 
with  another  agreement  dated  September  11,  1906,  between  the 
plaintiffs  and  certain  other  salt  manufacturers  in  the  north- 
west of  England.  They  considered  that  when  these  agree- 
ments were  construed  together  the  contract  of  1907  must  be 
held  illegal  as  being  in  restraint  of  trade,  and  as  forming  part 
of  a  scheme  for  securing  a  monopoly  by  restricting  output  and 
raising  prices.  'In  the  present  case,'  said  Farwell,  L.  J.,  'no 
circumstances  in  my  opinion  could  justify  such  a  contract 
made  for  the  mere  purpose  of  raising  prices,  with  the  insep- 
arable incident  of  depriving  the  members  of  the  public  of  the 
choice  of  manufacturers,  while  hoodwinking  them  into  the 
belief  that  such  choice  is  open  to  them ;  in  any  case,  the  special 
circumstances  would  have  to  be  pleaded  and  proved  by  the 
plaintiffs. ' 

Kales  R.  of  T.  Vol.  1—19 


290    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

"In  his  dissenting  judgment  Kennedy,  L.  J,,  held  that 
there  was  no  evidence  on  which,  so  far  as  the  interests  of  the 
community  were  concerned,  it  could  be  held  to  be  proved  that 
the  contract  was  contrary  to  public  policy.  It  was,  in  hia 
opinion,  principally  and  essentially  a  contract  for  sale  which 
was  made  between  manufacturers  and  sellers  of  salt  dealing 
with  each  other  on  equal  terms,  and  regulating  by  partial  and 
temporary  restrictions,  and  for  good  consideration,  the  manu- 
facture and  sale  of  salt  by  one  of  them  beyond  a  specified 
quantity,  but  only  as  part  of  a  scheme  for  mutual  profit.  He 
found  no  sufficient  evidence  that  the  provisions  of  the  contract 
of  1907  sued  on  were  so  injurious  that  it  ought  to  be  held  in- 
valid as  offending  against  public  policy." 

The  House  took  time  for  consideration. 

1914,  Feb.  12.  Viscount  Haldane,  L.  C.  My  Lords,  this 
is  an  appeal  by  the  plaintiffs  in  an  action  brought  to  recover 
damages  for  breach  of  a  contract  relating  to  the  sale  of  salt. 
The  question  to  be  determined  is  whether  the  contract  was 
enforceable.  His  Lordship  stated  the  facts  as  above  set  out 
and  continued : 

Some  doubt  has  been  raised  as  to  whether  the  general  agree- 
ment with  the  other  salt  manufacturers  of  September  11,  1906, 
was  put  in  evidence.  But  I  assume  for  the  present  that  it  was 
in  evidence,  and  I  turn  to  it.  It  is  contended  that  it  must  be 
looked  at  because  of  the  provision  of  the  contract  sued  on, 
which  says  (clause  7)  that  the  respondents,  if  they  make  any 
stoved  vacuum  salt,  are  to  be  elected  distributors  on  the  same 
terms  and  conditions  as  the  appellants'  present  distributors. 
These  terms  and  conditions  are  contained  in  a  document  dated 
August  7,  1908,  which  was  submitted  to  the  respondents  as 
already  stated,  and  which  they  refuse  to  sign.  It  is  headed 
"Distributors'  Appointment,"  and  it  purports  to  define  the 
terms  on  which  a  person  appointed  to  be  one  of  the  appel- 
lants' salt  distributors  may  purchase  salt  from  the  appellants 
and  sell  it.  It  defines  the  quantity  that  may  be  so  purchased 
at  prices  to  be  fixed  by  the  appellants,  and  the  conditions  on 
which  it  may  be  resold  at  prices  to  be  similarly  fixed,  and  it 
contains  provisions  regulating  the  amount  to  be  sold,  the  dis- 
counts, the  use  of  craft  and  rolling  stock,  the  freight   and 


THE  COMMON  LAW  291 

other  charges,  and  the  customers  to  whom  sales  may  be  made. 
It  provides  that  the  appellants  are  not  to  be  bound  to  deliver 
salt  except  at  the  vi^orks  where  it  is  produced,  and  that  they 
may,  on  receiving  any  order,  decide  at  which  of  the  works  of 
any  of  their  members  it  is  to  be  delivered.  The  document 
contains  a  statement  that  similar  appointments  had  been  given 
to  other  distributors,  who  were  named,  and  in  some  cases  it 
was  stated  that  the  appointment  contained  a  clause  providing 
that  it  should  not  prejudice  rights  under  an  agreement  of 
September  11,  1906,  being  the  general  agreement  already  re- 
ferred to  between  the  appellants  and  the  other  salt  manu- 
facturers. 

This  last-mentioned  agreement,  which  purports  to  be  made 
wath  fourteen  salt  manufacturers  of  Cheshire,  Lancashire, 
Worcester,  and  Stafford,  comprising  both  companies  and  firms, 
contains  provisions  largely  resembling  those  in  the  contract 
sued  on.  The  purpose  of  both  contracts  was  to  enable  the  appel- 
lant company  to  control  the  sales  and  prices  of  salt  within  its 
sphere  of  influence,  and  as  the  members  of  the  appellant  com- 
pany were  the  salt  manufacturers  themselves,  this  was  not 
impracticable. 

My  Lords,  it  is  no  doubt  true  that  where  on  the  plaintiff's 
case  it  appears  to  the  Court  that  the  claim  is  illegal,  and  that 
it  would  be  contrary  to  public  policy  to  entertain  it,  the  Court 
may  and  ought  to  refuse  to  do  so.  But  this  must  only  be 
when  either  the  agreement  sued  on  is  on  the  face  of  it  illegal, 
or  where,  if  facts  relating  to  such  an  agreement  are  relied  on, 
the  plaintiff's  case  has  been  completely  presented.  If  the 
point  has  not  been  raised  on  the  pleadings  so  as  to  warn  the 
plaintiff  to  produce  evidence  which  he  may  be  able  to  bring 
forward  rebutting  any  presumption  of  illegality  which  might 
be  based  on  some  isolated  fact,  then  the  Court  ought  not  to 
take  a  course  which  may  easily  lead  to  a  miscarriage  of  justice. 
On  the  other  hand,  if  the  action  really  rests  on  a  contract 
which  on  the  face  of  it  ought  not  to  be  enforced,  then  as  I  have 
already  said,  the  Court  ought  to  dismiss  the  claim,  irrespective 
of  whether  the  pleadings  of  the  defendant  raise  the  question 
of  illegality. 

Now,  in  the  case  before  us  it  is  to  me  obvious  that  the  Court 
of  Appeal  could  not  be  sure  that  it  had  got  before  it  the  whole 


292    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  the  materials  which  were  necessary  if  it  was  to  be  justified 
in  deciding  on  the  legality  of  what  it  took  to  be  a  scheme  for 
securing  the  monopoly  by  restricting  output  and  raising  prices, 
and  for  depriving  the  public  of  the  choice  of  manufacturers, 
while  hoodwinking  them  into  the  belief  that  such  choice  was 
open  to  them. 

Unquestionably,  the  combination  in  question  was  one  the 
purpose  of  which  was  to  regulate  supply  and  keep  up  prices. 
But  an  ill-regulated  supply  and  unremunerative  prices  may, 
in  point  of  fact,  be  disadvantageous  to  the  public.  Such  a 
state  of  things  may,  if  it  is  not  controlled,  drive  manufacturers 
out  of  business,  or  lower  wages,  and  so  cause  unemployment 
and  labor  disturbance.  It  must  always  be  a  question  of  cir- 
cumstances whether  a  combination  of  manufacturers  in  a  par- 
ticular trade  is  an  evil  from  a  public  point  of  view.  The  same 
thing  is  true  of  a  supposed  monopoly.  In  the  present  case 
there  was  no  attempt  to  establish  a  real  monopoly,  for  there 
might  have  been  great  competition  from  abroad  or  from  other 
parts  of  these  islands  than  the  part  which  was  the  field  of  the 
agreement.  On  material  questions  of  fact  such  as  these  the 
Court  of  Appeal  had  not  the  proper  evidence  before  it,  and 
the  pleadings  of  the  respondents  had  thrown  on  the  appellants 
no  duty  to  bring  forward  such  evidence. 

The  general  agreement  of  1906,  which  was  referred  to  in 
the  document  relating  to  the  appointment  of  distributors,  was 
not  the  agreement  sued  on.  It  constituted  only  a  surrounding 
circumstance  in  the  case,  and  it  is  impossible  to  predict  how 
that  case  might  have  appeared  had  the  appellants  presented 
full  evidence  of  all  the  circumstances.  The  Court  of  Appeal 
ought,  in  my  opinion,  in  the  absence  of  amended  pleadings  and 
full  evidence,  to  have  refused  to  enter  into  what  was  a  mere 
speculation  on  an  intricate  and  wide  question  of  fact.  If  this 
be  so,  then  the  only  question  which  can  legitimately  be  con- 
sidered is  whether  the  contract  sued  upon  is  one  which  on  the 
face  of  it  ought  not  to  be  enforced.  As  I  read  the  judgments 
of  the  majority  of  the  Lord  Justices,  they  seem  to  have  thought 
that  the  contract,  although  possibly  valid  if  taken  by  itself, 
was  not  so  in  view  of  inferences  of  fact  to  be  drawn  from  the 
character  of  the  outside  agreements  to  which  it  referred.  But 
if  there  is  not  sufficient  evidence  to  enable  a  court  to  review 


THE  COMMON  LAW  293 

the  situation  in  its  entirety,  then  the  Court  is  confined  to  what 
appears  on  the  face  of  the  contract  sued  upon,  including  any 
documents  incorporated  with  it.  As  the  outside  agreements 
and  documents  to  which  I  have  referred  were  not  so  incor- 
porated, I  think  that  they  could  not  be  looked  at  in  an  action 
with  the  restricted  issues  which  the  pleadings  before  us  raise. 

I  come  back,  therefore,  to  the  contract  on  which  the  action 
is  based.  My  Lords,  the  law  as  to  contracts  in  restraint  of 
trade  is  not  doubtful.  In  order  to  be  valid  a  clause  imposing 
a  restraint  must  be  reasonable,  and  he  who  says  that  the  re- 
straint is  so  must  make  it  out.  But  he  will  discharge  this  bur- 
den if  he  can  point  to  other  parts  of  the  contract  which  show 
the  reasonableness  of  the  restraining  clause.  If  the  contract 
read  as  a  whole  appears  on  the  face  of  it  not  to  be  unreason- 
able in  the  interest  either  of  the  parties  or  of  the  public,  that 
is  enough,  and  the  question  is  not  one  of  evidence.  Evidence 
may,  indeed,  be  given  as  to  the  character  of  the  business  and 
the  circumstances.  But  it  cannot  be  given  on  the  question  of 
the  reasonableness  of  what  appears  on  the  face  of  the  docu- 
ment when  construed  in  the  light  of  the  circumstances  as  to 
which  evidence  is  admissible.  The  question  is  one  of  law  for 
the  Court,  and  is  not  an  issue  of  fact. 

My  Lords,  when  the  controversy  is  as  to  the  validity  of  an 
agreement,  say  for  service,  by  which  some  one  who  has  little 
opportunity  of  choice  has  precluded  himself  from  earning  his 
living  by  the  exercise  of  his  calling  after  the  period  of  service 
is  over,  the  law  looks  jealously  at  the  bargain;  but  when  the 
question  is  one  of  the  validity  of  a  commercial  agreement  for 
regulating  their  trade  relations,  entered  into  between  two 
firms  or  companies,  the  law  adopts  a  somewhat  different  atti- 
tude— it  still  looks  carefully  to  the  interest  of  the  public,  but 
it  regards  the  parties  as  the  best  judges  of  what  is  reasonable 
as  between  themselves.  In  the  present  case  I  see  no  reason 
for  doubting  that  in  entering  into  the  contract  on  which  this 
action  was  brought  the  respondents  were  probably  acting  in 
their  own  best  interest.  It  may  well  be  that  such  a  contract 
was,  in  view  of  the  powerful  position  of  the  appellants,  the 
respondents'  best  way  of  securing  a  market  and  adequate 
prices.  And  if  this  be  once  conceded  I  find  nothing  else  in 
the  detailed  provisions  of  the  contract  excepting  machinery 


294    CO^IBINATIONS  AND  RESTRAINT  OF  TRADE 

for  working  out  the  bargain.  If  the  general  object  was  law- 
ful, then  these  provisions  were,  in  my  opinion,  free  from 
objection  on  the  score  of  illegality.  Nor  do  I  find  that  the  pub- 
lic interest  was  necessarily  or  even  probably  injured. 

I  have  already  adverted  to  the  fact  that  competition  from 
abroad  and  from  other  parts  of  the  United  Kingdom  was  not 
affected.  It  may  be,  for  all  that  appears,  that  agreements  of 
this  kind  were  the  only  effective  method  of  preventing  domes- 
tic competition  from  being  carried  to  a  length  which  would 
ultimately  prove  not  merely  ruinous  to  the  parties  themselves, 
but  injurious  to  the  public,  even  outside  that  portion  of  it 
which  was  dependent  on  the  prosperity  of  the  salt  manufac- 
turing industry.  No  doubt  if  there  were  a  monopoly  attempted 
to  be  set  up  which  was  calculated  to  enhance  prices  to  an 
unreasonable  extent,  that  would,  if  it  so  appeared  on  the  face 
of  the  contract,  be  ground  for  refusing  to  enforce  it.  But  an 
effective  attempt  to  set  up  such  a  monopoly  or  so  to  enhance 
prices  can  but  rarely  appear  on  the  face  of  an  agreement 
between  two  traders.  Whether  such  an  attempt  is  really  being 
made  is  almost  always  a  question  of  fact.  It  certainly  does 
not  appear  as  being  made  on  the  face  of  the  agreement  in 
question.  It  may  well  be  that  prices  such  as  18s.  or  23s.  which 
were  to  be  charged  for  the  appellants'  salt,  were  fair  prices. 
The  fact  that  the  manufacturer  is  only  to  receive  8s.  cannot, 
standing  by  itself,  be  treated  as  sufficient  evidence  to  the  con- 
trary. For  it  may  be  well  worth  while  for  a  firm  like  the 
respondents,  which  obviously  had  to  face  much  competition, 
to  take  a  low  price  in  order  to  secure  a  steady  market,  and 
the  appellants'  prices  may  have  been  no  higher  than  a  manu- 
facturer might  under  ordinary  circumstances  have  expected 
to  get. 

Nor  am  I  impressed  by  the  view  of  Farwell,  L.  J.,  that  the 
arrangements  stipulated  for  by  the  appellants  for  directing 
the  supply  of  orders  to  be  made  from  the  factories  which  they 
thought  most  convenient  in  particular  cases  was  detrimental 
to  the  public  who  might  be  hoodwinked  thereby.  Such  dis- 
tribution arrangements  are  common  in  business.  One  of  their 
obvious  purposes  is  to  save  cost  of  carriage,  and  there  is  no 
reason  to  suppose  that  the  business  world  is  either  ignorant 
that  they  may  exist,  and  so  is  likely  to  be  deceived,  or  is  in- 


THE  COMMON  LAW  S95 

capable  of  taking  care  of  itself.  In  an  appeal  which  recently 
came  before  the  Judicial  Committee  of  the  Privy  Council 
(Attorney-General  of  the  Commonwealth  of  Australia  v.  Ade- 
laide Steamship  Co.,  [1913]  A.  C.  781)  my  noble  and  learn«d 
friend  Lord  P'arker  delivered  on  behalf  of  the  committee  a 
judgment  in  which  the  law  on  these  subjects  was  fully  re- 
viewed. Among  other  statements  in  that  judgment  there  is 
one  which  bears  closely  on  the  question  before  us.  After 
explaining  the  difference  between  a  monopoly  in  the  strict 
sense  of  a  restrictive  right  granted  by  the  Crown,  and  a 
monopoly  in  the  popular  sense  in  which  what  is  meant  is  that 
a  particular  business  has  been  placed  under  the  control  of 
some  individual  or  group,  he  says  ([1913]  A.  C.  at  p.  796), 
that  it  is  "clear  that  the  onus  of  shewing  that  any  contract  is 
calculated  to  produce  a  monopoly  or  enhance  prices  to  an 
unreasonable  extent  will  be  on  the  party  alleging  it,  and  that 
if  once  the  Court  is  satisfied  that  the  restraint  is  reasonable 
as  between  the  parties  the  onus  will  be  no  light  one." 

My  Lords,  I  desire  to  adopt  this  proposition  as  applicable 
to  the  question  before  us.  For  the  reasons  I  have  given,  I  do 
not  think  that,  consistently  with  the  principle  so  expressed,  a 
Court  of  Justice  is  at  liberty  to  infer  from  the  terms  of  the 
contract  in  controversy  that  it  is  directed  to  establishing  either 
a  pernicious  monopoly  or  a  state  of  things  injurious  to  the 
public.  And  I  agree  with  what  was  said  by  Lindley,  L.  J., 
one  of  the  most  cautious  and  accurate  judges  of  our  time,  in 
Maxim-Nordenfelt  Co.  v.  Nordenfelt,  ([1893]  1  Ch.  630,  at  p. 
646):  "The  interest  of  the  public  is  no  doubt  adverse  to 
monopolies  and  to  restrictions  on  trade;  but  then  its  interest 
is  to  allow  its  members  to  carry  on  those  businesses  which 
they  themselves  prefer,  and  to  abandon  and  sell  to  the  best 
advantage  those  businesses  which  for  any  reason  they  do  not 
wish  to  continue." 

The  result  of  the  consideration  I  have  given  to  this  appeal 
is  that  I  think  that  this  House  should  declare  that  the  contract 
in  question  has  not  been  shown  to  be  in  unreasonable  restraint 
of  trade,  and  that  it  was,  therefore,  enforceable  by  the  appel- 
lants. As  the  Court  of  Appeal  did  not  proceed  to  dispose  of 
the  points  raised  by  the  respondents  as  to  the  measure  of 
damages,  the  case  must  be  remitted  to  it  for  that  purpose  with 


296    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  declaration  I  have  suggested.  The  appellants  are  entitled 
to  their  costs  of  the  appeal  to  this  House  and  also  to  their  costs 
of  the  last  hearing  in  the  Court  of  Appeal.    I  move  accordingly. 

LORD  MOLTON.23  The  contract  sued  upon  is  not  ex  facie 
illegal.  So  far  as  is  material  to  this  question,  it  may  be  de- 
scribed as  a  contract  whereby  the  defendants  have  the  option 
to  buy  up  to  a  certain  amount  of  stoved  salt  at  a  certain  price, 
but  there  is  a  condition  attached  to  this  option  that  if  they 
exercise  it  they  shall  not  resell  the  goods  except  at  certain 
prices  and  in  a  certain  way.  It  was  a  hopeless  task  to  argue 
that  such  a  contract  is  ex  facie  against  public  policy,  and 
accordingly  the  argument  in  the  Court  of  Appeal  and  in  this 
House  turned  mainly  on  the  nature  and  status  of  a  separate 
and  independent  contract  made  by  the  plaintiffs  with  other 
persons  which  was  not  incorporated  in,  and  did  not  form  part 
of,  their  contract  with  the  defendants.  It  was  contended  that 
this  latter  contract  was  in  restraint  of  trade  and  hurtful  to 
the  public,  and  that  the  contract  with  the  defendants  was  in 
aid  of  this  contract,  and  that  therefore  it  also  was  invalid. 
There  can  be  no  doubt  that  if  this  issue  had  been  raised  on 
the  pleadings  the  plaintiffs  might  have  called  relevant  evidence 
as  to  the  circumstances  under  which  these  contracts  were  made 
and  as  to  their  object  and  effect.  This  they  had  no  oppor- 
tunity of  doing  by  reason  of  the  defendants  electing  not  to 
raise  the  issue  by  their  pleadings,  and  we  cannot  pronounce 
on  the  question  whether  the  surrounding  circumstances  were 
such  as  to  render  the  contract  with  the  defendants  illegal  be- 
cause we  have  not  the  requisite  material  before  us. 

The  consequence  is  that  this  appeal  should  be  allowed  with 
costs.  The  case  must  be  remitted  to  the  Court  of  Appeal  on 
the  question  of  damages. 

LORD  PARKER  OF  WADDINGTON.^*  Even  assuming  that 
the  facts  and  documents  in  question,  if  unexplained,  would  es- 
tablish the  existence  of  an  attempt  on  the  part  of  the  plaintiffs 
to  establish  such  a  monopoly,  your  Lordships  cannot  disregard 
the  fact  that  the  plaintiffs  have  had  no  opportunity  of  ex- 

33 — Part   only   of    the   opiuioii    is  34 — Part   only   of   the   opinion   is 

given.  given. 


THE  COMMON  LAW  297 

plaining  them.  The  full  facts,  if  known,  might  profoundly 
modify  any  inferences  your  Lordships  might  be  induced  to 
draw  from  the  imperfect  information  now  before  the  House. 

For  example,  the  circumstances  under  which  the  plaintiffs 
entered  into  the  agreement  of  September  11,  1906,  with  the 
salt  manufacturers  of  Cheshire,  Lancashire,  Worcester,  and 
Stafford  may  have  been  analogous  to  those  which  the  Privy 
Council  recently  considered  in  the  case  of  Attorney-General 
of  the  Commonwealth  of  Australia  v.  Adelaide  Steamship  Co., 
([1913]  A.  C.  781),  in  order  to  determine  whether  the  trade 
restrictions  continued  in  the  ''vend"  agreement  therein  re- 
ferred to  were  necessarily  detrimental  to  public  interest.  The 
competition  between  salt  producers  within  the  area  covered 
by  the  agreement  of  September  11,  1906,  either  inter  se  or 
with  salt  producers  outside  this  area  may  have  been  so  drastic 
that  some  combination  limiting  output  and  regulating  com- 
petition within  the  area  so  as  to  secure  reasonable  prices  may 
have  been  necessary,  not  only  in  the  interests  of  the  salt  pro- 
ducers themselves,  but  in  the  interest  of  the  public  generally, 
for  it  cannot  be  to  the  public  advantage  that  the  trade  of  a 
large  area  sliould  be  ruined  by  a  cut-throat  competition.  Under 
these  circumstances,  though  it  was  no  doubt  open  to  the  Court 
of  Appeal,  taking  the  view  they  did  of  evidence,  to  direct  a 
new  trial,  it  was  not,  in  my  opinion,  open  to  them  to  hold  the 
contract  invalid  on  the  imperfect  information  before  them. 
It  appears  that  the  defendants  refused  to  concur  in  asking  the 
Court  of  Appeal  for  a  new  trial,  nor  have  they  asked  for  this 
on  the  present  appeal.  Under  these  circumstances,  I  think  the 
only  course  is  to  allow  the  appeal,  and  remit  the  case  to  the 
Court  of  Appeal  to  be  dealt  with  on  the  footing  that  the  con- 
tract was  valid. 

LORD  SUMNER.35  gy  this  contract  A.  buys  all  B.'s  prod- 
uct for  a  given  and  not  protracted  period,  and  buys  it  to  sell 
again.  B.  has  the  right  to  buy  back,  or  virtually  to  keep  out, 
a  certain  quantity,  if  he  desires  to  make  a  dealer's  as  well  as 
a  manufacturer's  profit.  To  prevent  B.  from  underselling  A. 
he  is  put  under  terms  as  to  his  sales  over.    In  law  B.  is  prob- 

35 — Part  only  of  the  opinion  id 
given. 


298    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ably  a  buyer  from  A.  and  a  seller  to  third  parties ;  practically 
his  position  hardly  differs  from  that  of  A.'s  del  credere  agent. 
To  restrict  an  agent's  authority  can  hardly  be  illegality  in 
the  principal,  and  there  is  little  more  here.  Further,  B.  is 
restrained  from  opening  up  any  more  salt-bearing  ground, 
directly  or  indirectly.  In  the  case  of  a  mineral  which  is  not 
inexhaustible  and  cannot  be  renewed,  that  may  as  well  make 
for  the  public  good  as  not.  No  doubt  the  difference  between 
the  selling  price  fixed  for  the  producers,  the  respondents,  and 
the  buying  price  open  to  the  public  is  extreme,  but  we  do  not 
know  enough  of  the  conditions  of  competition  or  of  the  other 
elements  in  the  ultimate  selling  price  beyond  bare  cost  of 
production  to  act  upon  it.  Doubtless  the  parties  entered  into 
the  contract  in  order  to  make  money  out  of  it,  probably  by 
keeping  up  prices,  but  that  is  not  conclusive. 

Order  of  the  Court  of  Appeal  reversed:  Declare  that  the 
contract  of  November  9, 1907,  has  not  been  shewn  to  he  in  unrea- 
sonable restraint  of  trade  and  that  it  was  therefore  enforceable 
by  the  appellants. 


COLLINS  V.  LOCKE 
(Privy  Council,  1879.    L.  R.  4  App.  Cas.  674.) 

The  judgment  of  their  Lordships  was  delivered  by  Sir 
Montague  E.  Smith :  ^6 

The  action  in  which  this  appeal  has  been  brought  arises  out 
of  a  contract  entered  into  between  certain  persons  carrying  on 
the  business  of  stevedores  in  the  port  of  IMelbourne  for  regu- 
lating and  distributing  among  them  the  stevedoring  of  ships 
in  that  port. 

By  the  deed,  which  contains  the  agreement,  the  four  parties 
to  it,  viz.,  the  firm  of  George  Washington  Robbins  and  Francis 
Robbins  Collins  (the  defendant  in  the  action  and  the  present 
appellant),  Alfred  John  Johnson,  and  Locke  (the  plaintiff, 
and  the  respondent  in  this  appeal),  covenanted  with  each 
other,  first,  that  "as  between  the  parties"  Messrs.  Robbins 

36 — Only  the  opinion  of  the  court 
is  given. 


THE  COMMON  LAW  293 

should  "be  absolutely  entitled  to  the  business  of  stevedoring 
all  ships  which  should  arrive  in  the  port  of  Melbourne  con- 
signed to  the  firm  of  Dalgety,  Blackwood  &  Co.,"  and  that 
each  of  the  other  parties  (using  the  words  above  cited  as  to 
each)  should  be  absolutely  entitled  to  the  business  of  stevedor- 
ing all  ships  which  should  arrive  in  the  port  consigned  to 
certain  other  firms,  viz.,  the  defendant  to  those  consigned  to 
J.  H.  White  &  Co.,  Johnson  to  those  consigned  to  MacFarlane 
&  Co.,  and  the  plaintiff  to  those  consigned  to  Holmes,  White 
&  Co.,  R.  Towns  &  Co.,  and  King,  Meng  &  Co.,  and  that  the 
parties  should  be  absolutely  entitled  for  their  own  use  to  the 
profits  arising  from  such  stevedoring  respectively.  This  first 
covenant  concludes  as  follows:  "And  neither  of  them  the 
said  several  parties  hereto  shall  not  (sic),  nor  will,  save  as 
hereinafter  expressly  provided,  undertake  or  be  in  any  way 
concerned  in  or  interfere  in  the  stevedoring,  either  in  whole 
or  in  part,  of  any  ship  or  vessel  consigned  to  any  of  the  said 
persons  or  firms  hereinbefore  particularly  mentioned  other- 
wise than  according  to  the  provision  in  that  behalf  hereinbefore 
contained." 

The  second  and  third  clauses  of  the  deed  are  in  the  follow- 
ing terms: 

"2.  That  if  any  or  either  of  the  said  firms  hereinbefore 
named  shall  refuse  to  allow  the  stevedoring  of  any  ship  or 
ships  consigned  to  them  to  be  done  by  the  party  who,  under 
the  last  preceding  clause  shall  be  entitled  thereto,  but  shall 
require  any  other  or  others  of  the  said  parties  hereto  to  do 
the  stevedoring  thereof,  then  and  in  such  case  such  party  so 
required  shall  and  will  give  an  equivalent  to  the  person  who 
shall  lose  the  stevedoring  of  such  ship  or  ships,  such  equiva- 
lent to  be  determined,  in  case  of  disagreement  between  the 
parties,  by  two  disinterested  persons,  to  be  nominated  by  Mr. 
James  Allison  Crane,  and  an  umpire  to  be  named  by  such 
arbitrators,  in  case  they  disagree. 

"3.  That  the  stevedoring  of  all  ships  not  consigned  to  any 
of  the  hereinbefore  mentioned  firms  shall  be  taken  and  steve- 
dored in  the  following  order;  that  is  to  say,  the  first  ship  to 
arrive  after  the  date  hereof  to  be  stevedored  by  the  said  John 
Kindlan  Collins,  the  second  by  the  said  Francis  Robbins,  the 
third  by  the  said  George  Washington  Robbins,  and  the  fourth 


300    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

by  the  said  Alfred  Joseph  Johnson,  and  so  on  in  such  order 
during  the  continuance  of  these  presents,  it  being  expressly 
agreed  that  the  said  James  Locke  shall  not  be  entitled  to  the 
stevedoring  of  any  ships  or  vessels  save  those  consigned  to  the 
said  firms  of  Holmes,  White  &  Co.,  R.  Towns  &  Co.,  and  King, 
Meng  &  Co." 

The  above  clauses  disclose  the  object  and  nature  of  the  con- 
tract, but  questions  arose  on  other  clauses  of  the  deed. 

The  fifth  clause  provides  that  if  any  of  the  firms  mentioned 
in  the  first  clause  should  cease  to  carry  on  business,  or  if  the 
number  of  ships  consigned  to  any  of  them  should  be  materially 
diminished,  a  readjustment  should  be  made  of  the  distribution 
of  the  ships,  and  in  case  any  firm  should  cease  to  carry  on 
business,  the  party  losing  such  firm  should  be  entitled  to  make 
a  selection  of  another  firm  in  Melbourne,  subject  to  arbitration 
in  case  of  disagreement. 

The  ninth  clause  is  a  covenant  for  the  payment  of  £1,000  as 
liquidated  damages  for  the  breach  of  any  of  the  covenants, 
and  the  tenth  contains  a  provision  for  the  submission  of  dis- 
putes to  arbitrators,  the  terms  of  which  will  be  more  fully 
referred  to  hereafter. 

R.  Towns  &  Co.,  one  of  the  firms  assigned  to  the  plaintiff, 
was  dissolved,  and  a  new  firm,  Stewart,  Couch  &  Co.,  succeeded 
to  its  business,  and  was  selected  by  the  plaintiff  under  the 
clause  of  the  agreement  above  referred  to. 

The  declaration,  after  setting  out  the  deed,  alleged  three 
breaches.  The  first  and  second  have  been  abandoned  by  the 
plaintiff's  counsel,  and  the  action  is  thus  reduced  to  the  last 
breach.  The  averments  which  precede  that  breach  allege  that 
the  plaintiff  had  selected  Stewart,  Couch  &  Co.,  in  the  place 
of  R.  Towns  &  Co.,  that  certain  ships  arrived  in  Melbourne 
consigned  to  Stewart,  Couch  &  Co.,  and  that  although  that 
firm  did  not  refuse  to  allow  the  stevedoring  of  these  ships  to 
be  done  by  the  plaintiff,  yet  the  defendant  did  the  stevedoring 
of  them,  whereby  the  plaintiff  lost  the  profit  which  would 
otherwise  have  accrued  to  him. 

On  the  first  plea  nothing  arises.  The  second  denies  the 
breaches.  The  third  sets  out  the  arbitration  clause,  and  avers 
that  no  arbitrators  had  been  appointed,  nor  award  made.  The 
fourth  sets  out  the  deed  at  length,  and  avers  that  there  was 


THE  COMMON  LAW  301 

no  consideration  for  it,  save  as  appears  by  the  deed ;  the  object 
of  the  plea  being  to  raise  the  question  that  the  deed  was  void 
as  being  in  restraint  of  trade.  The  fifth  denies  that  the  plain- 
tiff selected  Stewart,  Couch  &  Co.  in  place  of  R.  Towns  &  Co. ; 
and  the  last  plea  avers  that  the  other  parties  to  the  deed  did 
not  agree  to  such  selection. 

The  plaintiff  demurred  to  the  third  and  fourth  pleas,  and 
took  issue  on  the  others. 

The  particulars  in  the  action  mentioned  three  ships,  the 
Jason,  Clara,  and  Eastern  Monarch,  as  having  been  stevedored 
by  the  defendant  in  breach  of  the  agreement,  but  it  has  been 
admitted  that  the  action  is  not  maintainable  in  respect  of  the 
Jason. 

The  evidence  given  at  the  trial  was  short  and  meager.  The 
following  are  the  facts  appearing  upon  it,  so  far  as  they  are 
material  to  the  points  remaining  to  be  decided  upon  this  appeal. 
The  Clara  arrived  at  Melbourne  consigned  to  Stewart,  Couch 
&  Co.  No  question  arises  upon,  the  unloading,  which  was  done 
by  the  plaintiff.  The  Clara  then  passed  out  of  the  hands  of 
Stewart,  Couch  &  Co.  into  those  of  Poole,  Picken  &  Co.,  who 
employed  the  defendant  to  stevedore  her  for  the  outward 
voyage,  which  he  did. 

The  Eastern  Monarch  also  arrived  at  Melbourne  consigned 
to  Stewart,  Couch  &  Co.  The  defendant  both  loaded  and  un- 
loaded her.  Stewart,  Couch  &  Co.  had  nothing  to  do  with  the 
stevedores.  This  ship  also  passed  into  the  hands  of  other  mer- 
chants, viz.,  Bright  and  J.  H.  White,  who  employed  the  de- 
fendant to  load  her.  It  does  not  appear  who  were  the  persons 
who  employed  him  to  unload  the  ship. 

A  verdict  was  found  for  the  plaintiff,  with  the  following  dam- 
ages, viz. :  £125  for  the  Clara,  and  £155  for  the  Eastern  Mon- 
arch. A  rule  nisi  was  obtained  to  set  aside  the  verdict  and 
enter  it  for  the  defendant,  on  the  ground  that  the  third  plea 
was  proved,  or  to  reduce  the  damages  to  £20,  on  the  ground 
that  under  the  terms  of  the  agreement  the  plaintiff  was  only 
entitled  to  recover  the  profit  of  unloading  the  Eastern  Monarch. 
The  other  points  referred  to  in  the  rule  relate  to  the  breaches 
which  are  now  abandoned. 

The  Supreme  Coui-t,  after  argument,  discharged  the  above 


302    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

rule,  and  has  also  given  judgment  for  the  plaintiff  upon  the 
demurrers  to  the  third  and  fourth  pleas. 

There  was  really  no  issue  in  faet  taken  upon  the  third  plea, 
and  no  verdict  could  properly  be  entered  upon  it.  The  ques- 
tion on  it  is  raised  by  the  demurrer. 

The  point  as  to  the  reduction  of  the  damages  depends  upon 
what  may  be  held  to  be  the  right  construction  of  the  agree- 
ment. It  was  contended  on  this  point  by  the  defendant  that 
the  agreement  was  confined  to  the  work  done  for  ships  whilst 
in  the  hands  of  those  who  were  the  consignees  on  their  arrival 
in  the  port;  but  this  would  not  seem  to  have  been  the  inten- 
tion of  the  parties,  to  be  gathered  from  the  general  tenor  and 
the  particular  language  of  the  agreement.  The  ships  allotted 
to  each  of  the  parties  are  ' '  those  which  shall  arrive  in  the  port 
of  Melbourne  consigned  to  particular  firms."  This  language 
is  apparently  used  to  describe  the  class  or  set  of  ships  to  which 
each  party  is  to  be  absolutely  entitled  until  their  next  depar- 
ture from  the  port. 

The  agreement,  particularly  with  reference  to  clause  3,  seems 
to  be  an  attempt  to  make  provision  for  distributing  the  steve- 
doring business  of  all  ships  arriving  in  the  port  amongst  the 
parties  to  the  deed,  and  one  mode  adopted  for  ascertaining 
the  set  or  class  of  ships  to  which  each  is  to  be  entitled  is  by 
reference  to  the  firms  to  which  ships  are  on  arrival  consigned. 
It  is  of  course  quite  usual,  and  is  shewn  to  be  so  by  the  evi- 
dence given  in  the  case,  that  ships  should  be  chartered  or 
loaded  by  others  than  the  original  consignees;  and  if  the  de- 
fendant's construction  of  the  agreement  were  correct,  it  would 
follow  that  the  parties  would  have  provided  only  for  the  un- 
loading of  ships  upon  which  there  is  comparatively  little  profit, 
and  would  in  many,  if  not  in  most  cases,  have  left  out  of  their 
agreement  the  larger  and  more  profitable  business  of  loading 
them  with  the  outward  cargoes. 

Their  Lordships,  therefore,  agree  with  the  judges  of  the 
Supreme  Court  in  the  construction  they  have  placed  upon  the 
agreement  on  this  point,  and  think  that  so  much  of  the  rule  as 
prayed  for  a  reduction  of  damages  was  rightly  discharged. 
They  may,  however,  observe  here  that  the  plaintiff,  who  insists 
on  the  construction  which  enables  him,  if  the  action  is  other- 
wise   maintainable,    to    retain    the    full    amount    of   damages 


THE  COIVOION  LAW  303 

awarded  by  the  jury,  cannot  escape  from  the  effect  of  this 
construction  upon  the  question  of  the  validity  of  the  agree- 
ment with  reference  to  the  objection  that  it  is  void  as  being 
in  restraint  of  trade. 

That  question  arises  on  the  demurrer  to  the  fourth  plea. 

The  objects  which  this  agreement  has  in  view  are  to  parcel 
out  the  stevedoring  business  of  the  port  amongst  the  parties 
to  it,  and  so  to  prevent  competition,  at  least  amongst  them- 
selves, and  also  it  may  be  to  keep  up  the  price  to  be  paid  for 
the  work.  Their  Lordships  are  not  prepared  to  say  that  an 
agreement,  having  these  objects,  is  invalid  if  carried  into  effect 
by  proper  means,  that  is,  by  provisions  reasonably  necessary* 
for  the  purpose,  though  the  effect  of  them  might  be  to  create/ 
a  partial  restraint  upon  the  power  of  the  parties  to  exercise: 
their  trade. 

The  questions  for  consideration  appear  to  them  upon  the 
authorities   to   be,   whether   and  how   far  the   prohibitions   of,, 
this  deed,  luiving  regard  to  its  objects,  are  reasonable. 

The  numerous  cases  whicli  have  been  decided  on  this  sub- 
ject are  collected  in  the  notes  to  Mitchel  v.  Reynolds  in  the 
first  volume  of  Smith's  Leading  Cases.  It  may  be  gathered 
from  them  that  agreements  in  restraint  of  trade  are  against 
public  policy  and  void,  unless  the  restraint  they  impose  is 
partial  only,  and  they  are  made  on  good  consideration,  and 
are  reasonable.  The  Court,s  are  not  disposed  to  measure  the 
adequacy  of  the  consideration,  if  a  real  and  bona  fide  con- 
sideration exists,  and  the  modern  decisions  have  mostly  turned 
on  the  question  of  the  reasonableness  of  the  restraint  in  rela- 
tion to  the  objects  of  the  contract.  It  was  said  by  Lord  Ellen- 
borough,  in  delivering  the  judgment  of  the  Court  in  Gale  v. 
Reed  [8  East,  86]  :  "The  restraint  on  one  side  meant  to  be 
enforced  should  in  reason  be  co-extensive  only  with  the  benefits 
meant  to  be  enjoyed  on  the  other."  He  went  on  to  say:  "As 
the  carrying  the  restraint  further  would  be  arbitrary  and  use- 
less between  the  parties,  a  construction  which  would  have 
that  effect  must  be  reluctantly  resorted  to,"  and  for  that  rea- 
son a  construction  which  would  not  have  this  effect  was  given 
to  the  particular  agreement  in  that  case. 

In  the  case  of  Horner  v.  Graves  [7  Bing.  743],  Tindal,  C.  J., 
in  delivering  the  judgment  of  the  Court,  said:    "We  do  not 


!>.& 


304    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

see  how  a  better  test  can  be  applied  to  the  question,  whether 
reasonable  or  not,  than  by  considering  whether  the  restraint 
is  such  only  as  to  afford  a  fair  protection  to  the  interests  of 
the  party  in  favour  of  whom  it  is  given,  and  not  so  large  as  to 
interfere  with  the  interests  of  the  public.  Whatever  restraint 
is  larger  than  the  necessary  protection  of  the  party  can  be  of 
no  benefit  to  either,  it  can  only  be  oppressive,  and,  if  op- 
pressive, it  is  in  the  eye  of  the  law  unreasonable." 

The  law  as  to  the  reasonableness  of  the  restraint  in  con- 
tracts of  this  kind  was  very  fully  considered  in  the  judgment 
of  the  Court  of  Exchequer  in  the  case  of  Mallan  and  Others  v. 
May   [11  M.  &  W.  653].     There  by  a  deed  under  which  the 
defendant  became  assistant  to  the  plaintiffs  in  their  business 
of  surgeon  dentists,  he  covenanted  that  he  would  not  carry  on 
that  business  in  London,  "or  in  any  of  the  towns  or  places  in 
England  or  Scotland  where  the   plaintiffs  might  have  been 
practicing  before  the  expiration  of  the  defendant's  service." 
The  declaration  contained  two  breaches;  the  first  for  practis- 
ing  in   London,    the    second    for   practising   in    another   place 
where  the   plaintiffs  had   practised.     The   Court   adopted   the 
principle  of  the  decision  in  Horner  v.  Graves   [7  Bing.  743], 
and  holding  the  contract  to  be  divisible,  decided  that  the  pro- 
hibition against  practising  in  London  was  reasonable  and  good, 
but  that  the  covenant  against  practising  in  other  towns  and 
places  went  beyond  what  the  protection  of  any  interests  of 
the  plaintiffs  required,  and  was,  therefore,  an  unreasonable 
restriction.     The  Court  accordingly   gave   judgment  for   the 
plaintiffs  on  the  first  breach,  and  for  the  defendant  on  the 
second.     The  principles  on  which  this  case  was  decided  were 
upheld  by  the  Exchequer  Chamber  in  Price  v.  Green  [16  M. 
&W.  346]. 

Applying  the  rule  to  be  collected  from  the  authorities,  it 
appears  to  their  Lordships  that  the  provision  contained  in  the 
second  clause  of  the  deed,  viz.,  that  if  either  of  the  named 
persons  should  refuse  to  allow  the  stevedoring  of  any  ship  to 
be  done  by  the  party  entitled  to  it  under  the  first  clause,  and 
should  require  one  of  the  other  parties  to  do  it,  such  party  so 
required  should  give  an  equivalent  to  the  party  who  lost  the 
stevedoring,  to  be  determined  by  arbitrators,  is  not  unreason- 
able, since  it  provides  in  a  fair  and  reasonable  way  for  each 


THE  COMMON  LAW  305 

party  obtaining  the  benefit  of  the  stevedoring  of  the  ships  to 
which  by  the  contract  he  was  to  be  entitled.  Each  party 
might  in  turn  derive  benefit  from  this  clause,  and  one  of  the 
four  firms  would  always  get  the  profit  of  the  ship  stevedored, 
though  the  work  might  be  done  by  another  of  them.  As  re- 
gards the  merchant,  also,  he  can  have  his  ship  stevedored  by 
the  party  whom  he  may  require  to  do  it,  at  least  there  is  no 
prohibition  against  his  having  it  so  done. 

But  the  operation  of  the  covenant  at  the  end  of  the  first 
clause,  upon  which  the  third  breach  in  the  action  is  founded, 
is  productive  of  wholly  different  results.  That  covenant  is 
only  modified  by  clause  2  as  regards  the  original  consignees, 
and  therefore  in  the  case  of  ships  passing  out  of  the  hands  of 
the  named  firms  to  which  they  were  consigned  on  arrival,  and 
being  chartered  or  loaded  by  other  merchants  (which  is  the 
present  case),  the  effect  of  the  covenant  is,  that  as  to  such 
ships,  if  the  merchants  loading  them  should  not  choose  to 
employ  the  party  to  the  agreement  who,  as  between  themselves, 
was  entitled  to  do  the  stevedoring,  all  the  parties  to  the  agree- 
ment are  deprived  of  the  work;  in  the  words  of  Mr.  Justice 
Fellows  such  ships  are,  "so  to  speak  tabooed  to  them  all." 
The  covenant  in  such  cases  restrains  three  of  the  four  parties 
to  the  agreement  from  exercising  their  trade,  without  giving 
any  profit  or  benefit  to  compensate  for  the  restriction  to  either 
of  the  four,  whilst  the  combination  they  have  thus  entered 
into  is  obviously  detrimental  to  the  public,  by  depriving  the 
merchants  of  the  power  of  employing  any  of  these  parties, 
who  are  probably  the  chief  stevedores  of  the  port,  to  load  their 
ships,  unless  in  each  case  they  employ  the  one  of  the  four  to 
whom  the  ship,  as  between  themselves,  has  been  allotted,  how- 
ever great  and  well  founded  their  objections  may  be  to  employ 
him.  Such  a  restriction  cannot  be  justified  upon  any  of  the 
grounds  on  which  partial  restraints  of  trade  have  been  sup- 
ported. It  is  entirely  beyond  anything  the  legitimate  interests 
of  the  parties  required,  and  is  utterly  unprofitable  and  un- 
necessary, at  least  for  any  purpose  that  can  be  avowed. 

Yet  a  construction  of  the  clause  producing  the  above-men- 
tioned consequences  is  that  on  which  the  plaintiff  insists,  and 
on  which  he  is  compelled  to  rely  to  sustain  his  only  remaining 
breach.    He  is  not  in  a  position  to  maintain  his  action  upon 

Kales  R.  of  T.  Vol.  1—20 


306    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  second  clause  of  the  agreement,  because  Stewart,  Couch 
&  Co.  did  not  refuse  to  employ  him  to  do  the  work,  and  even 
if  he  could  have  brought  his  ease  within  that  clause,  he  must 
have  failed  in  this  action,  because,  as  was  rightly  held  by  the 
Court  below  in  dealing  with  the  second  breach,  the  action  will 
not  lie  under  clause  2  until  the  amount  of  the  equivalent  to  be 
paid  has  been  ascertained  in  the  manner  required  by  that 
clause. 

The  part  of  the  agreement  which  is  open  to  objection,  though 
differing  in  its  circumstances  and  in  the  degree  of  the  restraint 
which  it  imposes  on  the  freedom  of  trade,  is  not  distinguish- 
able in  its  nature  from  that  which  was  held  to  be  void  in  Hil- 
ton V.  Eckersley  [6  E.  &  B.  47;  Ibib.  67]  ;  whilst  it  cannot  be 
justified  on  the  ground  upon  which  Mr.  Justice  Erie  (who 
differed  from  the  majority  of  the  Court)  thought  the  contract 
in  that  case  might  be  supported,  viz.,  that  it  might  be  neces- 
sary for  the  protection  of  the  lawful  interests  of  the  parties. 
The  object  of  the  contracting  parties  in  that  case  was  to  pro- 
tect their  interest  as  masters  against  combinations  of  work- 
men by  an  agreement  to  conduct  their  works,  or  wholly  or 
partially  to  suspend  them  for  a  time,  as  the  majority  should 
resolve;  and  the  learned  judge  thought  that  this  object  justi- 
fied the  mutual  restraint  of  trade  which  they  imposed  on  each 
other. 

Upon  the  construction,  therefore,  which  the  plaintiff  has 
placed  upon  the  covenant  in  question,  and  which  upon  the 
whole  their  Lordships  are  of  opinion  is  correct,  they  think, 
for  the  reasons  above  stated,  that  it  creates  an  unreasonable 
restraint  upon  the  parties  in  their  trade,  and  ought  not  to 
receive  the  aid  of  the  Courts  to  enforce  it.  They  have  already 
said  that  this  objection  does  not  apply  to  clause  2  of  the  deed, 
and  they  consequently  think  that  judgment  on  the  demurrer 
to  the  fourth  plea  should  be  entered  for  the  defendant  as  to 
the  first  and  third  breaches,  but  for  the  plaintiff  as  to  the 
second  breach. 

The  remaining  question  is  that  raised  by  the  demurrer  to 
the  third  plea,  though,  after  the  opinion  which  their  Lord- 
ships have  just  expressed,  the  decision  of  it  is  only  material 
as  regards  costs. 

The  question  so  raised  is,  whether  the  general  arbitration 


THE  COMMON  LAW  307 

clause  (clause  11)  affords  an  answer  to  the  action,  there  hav- 
ing been  no  arbitration  and  no  award  under  it. 

Since  the  case  of  Scott  v.  Avery,  in  the  House  of  Lords  [5 
H.  L.  C.  811],  the  contention  that  such  a  clause  is  bad  as  an 
attempt  to  oust  the  courts  of  jurisdiction  may  be  passed  by. 
The  questions  to  be  considered  in  the  case  of  such  clauses  are, 
whether  an  arbitration  or  award  is  necessary  before  a  com- 
plete cause  of  action  arises,  or  is  made  a  condition  precedent 
to  an  action,  or  whether  the  agreement  to  refer  disputes  is  a 
collateral  and  independent  one.  That  question  must  be  de- 
termined in  each  case  by  the  construction  of  the  particular 
contract,  and  the  intention  of  the  parties  to  be  collected  from 
its  language.  The  provision  in  the  second  clause  of  this  con- 
tract falls,  as  their  Lordships  have  already  said,  within  the 
first-mentioned  category,  because  the  equivalent  to  be  given 
in  lieu  of  the  profit  would  not  be  payable  until  the  amount  of 
it  had  been  ascertained  in  the  manner  prescribed.  But  the 
11th  clause,  according  to  the  intention  to  be  collected  from 
the  whole  deed,  appears  to  them,  though  by  no  means  with 
clearness,  to  be  a  collateral  and  independent  agreement.  It 
extends  to  all  doubts,  differences,  and  disputes  which  should 
arise  touching  the  agreement,  and  stipulates  that  all  matters 
in  difference  should  be  submitted  to  arbitrators. 

The  learned  counsel  for  the  defendant  strongly  relied  on 
the  part  of  the  clause  which  is  in  these  words:  "And  the 
award  of  the  arbitrators  shall  be  conclusive,  and  any  of  the 
parties  shall  not  be  entitled  to  commence  or  maintain  any 
action  at  law  or  suit  in  equity  in  respect  of  the  matters  so 
submitted  as  aforesaid,  except  for  the  amount  or  amounts  by 
the  said  award  determined  to  be  paid  by  any  one  or  more  of  the 
said  parties  to  the  other  or  others  of  them,  or  otherwise  in 
accordance  with  the  terms  and  conditions  of  the  said  award, 
as  to  the  acts  or  deeds  to  be  made,  done,  executed,  and  per- 
formed." 

This  passage,  no  doubt,  contains  negative  words,  but  there 
is  ambiguity  in  the  words  "in  respect  of  the  matters  so  sub- 
mitted as  aforesaid,"  as  to  whether  they  were  meant  to  apply 
to  all  matters  which  were  to  be  submitted  to  arbitrators  under 
the  clause,  or  to  the  matters  which,  after  they  arose,  had  been 
specifically  submitted  in  the  manner  prescribed.    Looking  out 


308    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  this  clause,  it  is  material  to  consider  clause  9,  which  is  as 
follows:  "That  in  case  of  any  breach  or  non-performance  by 
any  of  the  parties  hereto  of  any  or  either  of  the  covenants  or 
agreements  hereinbefore  contained,  such  party  so  committing 
such  breach,  or  not  performing  such  covenant  or  agreement, 
shall  and  will  well  and  truly  pay  unto  each  of  the  other  parties 
hereto  respectively,  their  or  his  executors,  administrators,  or 
assigns,  the  sum  of  one  thousand  pounds,  as  and  for  liquidated 
damages  for  such  breach  or  non-performance,  but  without 
prejudice  nevertheless  to  the  right  of  any  of  the  said  parties, 
hereto  to  enforce  the  specific  performance  of  the  covenants 
and  agreements  hereinbefore  contained,  or  any  or  either  of 
them." 

It  may  be  inferred  from  this  clause  that  the  parties  contem- 
plated that  an  action  might  be  brought  for  these  damages, 
and  with  reference  to  the  proviso  to  the  clause,  that  they  in- 
tended to  reserve  the  right  to  bring  a  suit  for  specific  per- 
formance. Their  Lordships  are,  therefore,  disposed  to  think 
that  the  negative  words  in  the  arbitration  clause  were  only 
intended  to  apply  to  matters  actually  submitted  to  arbitration. 
They  will  not,  therefore,  disturb  the  judgment  of  the  Court 
below  on  this  point. 

The  other  points  mentioned  by  the  appellant's  counsel  were 
disposed  of  during  the  argument. 

In  the  result,  their  Lordships  are  of  opinion  that  the  rule 
Qiisi,  so  far  as  it  prays  to  enter  the  verdict  for  the  defendant 
on  the  first  and  second  breaches,  should  be  made  absolute,  and 
as  to  the  rest  should  be  discharged ;  that  the  judgment  for  the 
plaintiff  on  the  demurrer  to  the  third  plea  should  be  affirmed; 
and  that  the  judgment  for  the  plaintiff  on  the  demurrer  to  the 
fourth  plea  should  be  reversed  as  to  the  first  and  third  breaches, 
and  judgment  entered  as  to  these  breaches  for  the  defendant, 
and  they  will  humbly  advise  Her  Majesty  accordingly. 

The  appellant  having  succeeded  only  on  the  point  of  the 
partial  invalidity  of  the  agreement,  in  respect  to  which  both 
parties  are  equally  in  fault,  their  Lordships  will  make  no 
order  as  to  the  cost  of  this  appeal. 


THE  COMMON  LAW  309 

MOGUL  STEA1\ISHIP  CO.  v.  McGREGOR,  GOW  &  CO. 

(House  of  Lords,  1891.    L.  R.  [1892]  App.  Cas.  25'.) 

Appeal  from  a  decision  of  the  Court  of  Appeal  [23  Q.  B.  D. 
598].  The  action  was  brought  by  the  appellants  against  the 
respondents.     The  statement  of  claim  alleged  as  follows: 

1.  The  plaintiffs  have  suffered  damage  by  reason  of  the  de- 
fendants (other  than  Sutherland,  Barnes,  Holt,  and  Swire),  as 
and  being  owners  of  numerous  steamers  trading  between  ports 
in  the  Yangtsekiang  River  and  London,  and  the  defendants 
Sutherland,  Barnes,  Holt,  and  Swire,  as  and  being  interested 
in  the  steamers  owned  by  the  defendants  the  Peninsular  and 
Oriental  Steam  Navigation  Company  and  the  Ocean  Steam- 
ship Company,  conspiring  together  and  with  other  persons  at 
present  unknown  to  the  plaintiffs  to  prevent  the  plaintiffs  from 
obtaining  cargoes  for  steamers  owned  by  the  plaintiffs  from  ship- 
pers to  be  carried  from  ports  in  the  said  river  to  London,  for 
reward  to  the  plaintiffs  in  that  behalf. 

2.  The  conspiracy  consisted  and  consists  of  a  combination 
and  agreement  by  and  amongst  the  defendants  (other  than 
Sutherland,  Barnes,  Holt,  and  Swire)  as  and  being  owners  of 
steamers  trading  as  aforesaid  and  having  by  reason  of  such 
combination  and  agreement  control  of  the  homeward  shipping 
trade,  and  the  defendants  Sutherland,  Barnes,  Holt,  and 
Swire,  as  and  being  interested  in  the  steamers  owned  as  afore- 
said, pursuant  to  which  shippers  were  and  are  bribed,  coerced 
and  induced  to  agree  to  forbear  and  to  forbear  from  shipping 
cargoes  by  the  steamers  of  the  plaintiffs. 

3.  In  the  alternative  the  conspiracy  consisted  and  consists 
of  a  combination  and  agreement  by  and  amongst  the  defend- 
ants, as  and  being  owners  of  and  interested  in  steamers  as 
aforesaid,  pursuant  to  which  the  defendants,  with  the  intent 
to  injure  the  plaintiffs  and  prevent  them  obtaining  cargoes 
for  their  steamers  trading  between  the  said  ports,  agreed  to 
refuse  and  refused  to  accept  cargoes  from  shippers  except 
upon  the  terms  that  the  said  shippers  should  not  ship  any 
cargoes  by  the  steamers  of  the  plaintiffs,  and  by  threats  of 
stopping  the  shipment  of  homeward  cargoes  altogether,  which 
threats  they  had  the  power  and  intended  to  carry  into  effect, 
did  and  do  prevent  shippers  from  shipping  cargoes  by  the 


310    COMBINATIONS  AND  RESTRAINT  OF  TRADE! 

plaintiffs'  steamers  and  threaten  and  intend  to  continue  so 
to  do. 

The  plaintiffs  claimed  damages  and  an  injunction  to  re- 
strain the  defendants  from  continuing  the  said  wrongful  acts. 
An  application  for  an  interim  injunction  was  refused  by  Lord 
Coleridge,  C.  J.,  and  Fry,  L.  J.  [15  Q.  B.  D.  476].  The  fol- 
lowing are  the  material  facts  proved  at  the  trial  of  the  action 
before  Lord  Coleridge,  C.  J.,  without  a  jury. 

The  appellant  company  was  incorporated  in  1883  and  took 
over  the  steamers  owned  by  Gellatly  &  Co.,  and  among  them 
the  SS.  Pathan,  Afghan,  and  Ghazee,  which  were  in  China  in 
the  tea  seasons  of  1884  and  1885.  Gellatly  &  Co.  were  the 
principal  owners  in  and  managers  of  the  appellant  company, 
and  were  also  the  London  outward  loading  brokers  of  the 
Ocean  Steamship  Company.  The  respondents  were  owners 
of,  or  managing  owners  interested  in,  steamers  engaged  in  the 
trade  between  China  and  England  and  elsewhere. 

The  ''tea  season"  in  China  lasts  about  five  to  six  weeks, 
beginning  from  the  latter  part  of  May.  Tea  exported  during 
the  season  from  Hankow  for  England  is  either  shipped  there 
(600  miles  up  the  river  Yangtsze)  direct  for  England  or  sent 
to  Shanghai  (at  the  mouth  of  the  river)  and  there  re-shipped. 
The  defendants  desire  to  secure  this  trade  for  themselves  to 
maintain  freights  at  remunerative  rates.  With  this  object 
they  had  in  some  previous  years  agreed  among  themselves  to 
regulate  the  amount  of  tonnage  to  be  sent  up  to  Hankow 
and  the  freights  to  be  demanded.  In  the  spring  of  1884  they 
held  a  conference,  as  the  result  of  which  they  issued  to  mer- 
chants and  shippers  in  China  the  following  circular: 

"Shanghai,  10th  May,  1884. 

"To  those  exporters  who  confine  their  shipments  of  tea  and 
general  cargo  from  China  to  Europe  (not  including  the 
Mediterranean  and  Black  Sea  ports)  to  the  P.  &  0.  S.  N.  Co.'s 
M.  M.  Co.'s  0.  S.  N.  Co.'s  Glen,  Castle,  Shire  and  Ben  lines 
and  to  the  SS.  Oopack  and  Ningchow,  we  shall  be  happy  to 
allow  a  rebate  of  5  per  cent,  on  the  freights  charged. 

"Exporters  claiming  the  returns  will  be  required  to  sign  a 
declaration  that  they  have  not  made  or  been  interested  in  any 
shipments  of  tea  or  general  cargo  to  Europe  (excepting  the 


THE  COMMON  LAW  311 

ports  above  named;  by  other  than  the  said  lines.  Shipments 
by  the  SS.  Albany,  Pathan,  and  Ghazee  on  their  present 
voyages  from  Hankow  will  not  prejudice  claims  for  returns. 
Each  line  to  be  responsible  for  its  own  returns  only,  which 
will  be  payable  half-yearly,  commencing  the  30th  of  October 
next.  Shipments  by  an  outside  steamer  at  any  of  the  ports  in 
China  or  at  Hong  Kong  will  exclude  the  firm  making  such 
shipments  from  participation  in  the  return  during  the  whole 
six-monthly  period  within  which  they  have  been  made,  even 
although  its  other  branches  may  have  given  entire  support 
to  the  above  lines. 

''The  foregoing  agreement  on  our  part  to  be  in  force  from 
present  date  till  the  30th  of  April,  1886." 

The  plaintiffs  (who  were  not  members  of  the  conference) 
were  admitted  to  the  benefits  of  the  arrangement  in  respect  of 
their  vessels,  the  Pathan  and  Ghazee,  for  the  homeward 
voyage  of  that  season  only. 

In  1885  the  defendants  held  another  conference  and  came 
to  a  written  agreement,  dated  the  7th  of  April,  which  regu- 
lated as  between  the  defendants  the  tea  trade  with  China  and 
Japan,  and  provided  for  a  certain  division  of  cargoes  for  the 
determination  of  the  rates  of  freight  and  for  the  continuance 
of  the  rebate  of  5  per  cent.  It  also  provided  that  if  "out- 
siders" should  start  for  Hankow,  Conference  steamers  must 
meet  them  there,  the  selection  of  tonnage  to  be  employed  for 
this  purpose  being  left  to  the  Shanghai  agents  of  the  lines  in 
consultation  together,  the  number  to  be  limited  as  much  as 
consistent  with  effective  opposition.  That  should  there  not 
be  a  Conference  steamer  in  port  or  named  for  despatch  within 
a  week  with  available  cargo  space,  shipments  made  by  an 
outsider  during  that  period  should  not  invalidate  the  claim 
for  the  rebate  of  5  per  cent,  on  the  freights.  That  agents  of 
Conference  steamers  in  China  and  Japan  should  be  prohibited 
from  being  interested  directly  or  indirectly  in  opposing  steam- 
ers, or  in  the  loading  of  sailing  vessels  of  outsiders.  And  that 
the  agreement  might  be  terminated  at  any  time  on  notice 
being  given  by  the  party  wishing  to  retire  to  each  of  the 
others,  but  only  by  principals  at  home  and  not  by  agents 
abroad.  Copies  of  this  agreement  were  sent  by  the  defend- 
ants to  their  agents  at  Shanghai.     The  plaintiffs  desired  to 


312    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

join  this  conference,  but  were  excluded  from  it  and  from  all 
its  benefits,  and  in  ]\Iay,  1885,  sent  the  Pathan  and  Afghan 
to  Hankow  to  endeavor  to  secure  homeward  cargoes.  The 
defendants'  agents  at  Shanghai  thereupon  sent  to  shippers  at 
Hankow  the  following  circular: 

"Private.  Shanghai,  11th  May,  1885. 

"Referring  to  our  circular  dated  the  10th  of  May,  1884,  we 
beg  to  remind  you  that  shipments  for  London  by  the  SS. 
Pathan,  Afghan,  and  Aberdeen,  or  by  other  non-Conference 
steamers  at  any  of  the  ports  in  China  or  at  Hong  Kong,  will 
exclude  the  firm  making  such  shipments  from  participation 
in  the  return  during  the  whole  six-monthly  period  in  which 
they  have  been  made,  even  although  the  firm  elsewhere  may 
have  given  exclusive  support  to  the  Conference  lines." 

The  defendants  also  despatched  some  Conference  steamers 
to  Hankow  to  oppose  the  Pathan  and  Afghan  and  secure  the 
freights,  if  possible,  to  the  exclusion  of  non-Conference  ves- 
sels, and  with  this  object  they  underbid  the  plaintiffs  and 
caused  a  general  reduction  of  freights  at  Hankow.  In  the 
result  the  Pathan  and  Afghan  obtained  freights,  but  at  very 
low  and  unremunerative  rates.  A  letter  of  the  1st  of  May 
was  put  in  from  the  chairman  of  the  P.  &  0.  Co.  to  their 
agent  at  Shanghai  to  the  effect  that  if  a  firm  of  agents  at 
Hankow  (who  acted  there  both  for  that  company  and  for  the 
plaintiffs)  should  carry  out  their  intention  of  loading  the 
plaintiffs'  vessels  home  the  P.  &  0.  Co.  would  have  to  close 
their  relations  with  them.  On  the  28th  of  May,  Gellatly  & 
Co.  were  dismissed  from  the  agency  of  the  Ocean  Steamship 
Company. 

The  action  was  brought  on  the  29th  of  May,  1885.  It  was 
agreed  that  the  damages  should,  if  necessary,  be  ascertained 
by  a  reference.  Lord  Coleridge,  C.  J.,  made  an  order  entering 
judgment  for  the  defendants  with  costs  [21  Q.  B.  D.  544]. 
That  order  was  affirmed  by  the  Court  of  Appeal  (Bowen  and 
Fry,  L.  JJ.,  Lord  Echer,  M.  R.,  dissenting  [23  Q.  B.  D.  598]). 
Dec.  18.     Lord  Halsbury,  L.  C.  : 

My  Lords,  notwithstanding  the  elaborate  examination  which 
this  case  has  undergone,  both  as  to  fact  and  law,  I  believe  the 


THE  COMMON  LAW  3l3 

facts  may  be  very  summarily  stated,  and  when  so  stated  the 
law  seems  to  me  not  open  to  doubt. 

As  associated  body  of  traders  endeavor  to  get  the  whole  of 
a  limited  trade  into  their  own  hands  by  offering  exceptional 
and  very  favorable  terms  to  customers  who  will  deal  exclu- 
sively with  them;  so  favorable  that  but  for  the  object  of 
keeping  the  trade  to  themselves  they  would  not  give  such 
terms;  and  if  their  trading  were  confined  to  one  particular 
period  they  would  be  trading  at  a  loss,  but  in  the  belief  that 
by  such  competition  they  will  prevent  rival  traders  competing 
with  them,  and  so  receive  the  whole  profits  of  the  trade  to 
themselves. 

I  do  not  think  that  I  have  omitted  a  single  fact  upon  which 
the  appellants  rely  to  show  that  this  course  of  dealing  is 
unlawful  and  constitutes  an  indictable  conspiracy. 

Now  it  is  not  denied  and  cannot  be  even  argued  that  prima 
facie  a  trader  in  a  free  country  in  all  matters  "not  contrary 
to  law  may  regulate  his  own  mode  of  carrying  on  his  trade 
according  to  his  own  discretion  and  choice."  This  is  the 
language  of  Baron  Alderson  in  delivering  the  judgment  of 
the  Exchequer  Chamber  [Hilton  v.  Eckersley,  6  E.  &  B.  at 
pp.  74,  75],  and  no  authority,  indeed  no  argument,  has  been 
directed  to  qualify  that  leading  proposition.  It  is  necessary, 
therefore,  for  the  appellants  here  to  show  that  what  I  have 
described  as  the  course  pursued  by  the  associated  traders  i« 
a  "matter  contrary  to  law." 

Now,  after  a  most  careful  study  of  the  evidence  in  this 
case,  I  have  been  unable  to  discover  anything  done  by  the 
members  of  the  associated  body  of  traders  other  than  an 
offer  of  reduced  freights  to  persons  who  would  deal  exclu- 
sively with  them;  and  if  this  is  unlawful  it  seems  to  me  that 
the  greater  part  of  commercial  dealings,  where  there  is  rivalry 
in  the  trade,  must  be  equally  unlawful. 

There  are  doubtless  to  be  found  phrases  in  the  evidence 
which,  taken  by  themselves,  might  be  supposed  to  mean  that 
the  associated  traders  were  actuated  by  a  desire  to  inflict 
malicious  injury  upon  their  rivals;  but  when  one  analyzes 
what  is  the  real  meaning  of  such  phrases  it  is  manifest  that 
all  that  is  intended  to  be  implied  by  them  is  that  any  rival 
trading  which  shall  be  started  against  the  association  will  be 


314    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

rendered  unprofitable  by  the  more  favorable  terms,  that  is  to 
say,  the  reduced  freights,  discounts,  and  the  like  which  will 
be  given  to  customers  who  will  exclusively  trade  with  the 
associated  body.  And,  upon  a  review  of  the  facts,  it  is  im- 
possible to  suggest  any  malicious  intention  to  injure  rival 
traders,  except  in  the  sense  that  in  proportion  as  one  with- 
draws trade  that  other  people  might  get,  you,  to  that  extent, 
injure  a  person's  trade  when  you  appropriate  the  trade  to 
yourself.  If  such  an  injury,  and  the  motive  of  its  infliction, 
is  examined  and  tested,  upon  principle,  and  can  be  truly 
asserted  to  be  a  malicious  motive  within  the  meaning  of  the 
law  that  prohibits  malicious  injury  to  other  people,  all  com- 
petition must  be  malicious  and  consequently  unlawful,  a  suf- 
ficient rcductio  ad  ahsurdiim  to  dispose  of  that  head  of 
suggested  unlawfulness. 

The  learned  counsel  who  argued  the  case  for  the  appellants, 
with  their  usual  force  and  ability,  were  pressed  from  time  to 
time  by  some  of  your  Lordships  to  point  out  what  act  of 
unlawful  obstruction,  violence,  molestation,  or  interference 
was  proved  against  the  associated  body  of  traders,  and,  as  I 
have  said,  the  only  wrongful  thing  upon  which  the  learned 
counsel  could  place  their  fingers  was  the  competition  which  I 
have  already  dealt  with.  Intimidation,  violence,  molestation, 
or  the  procuring  of  people  to  break  their  contracts,  are  all 
of  them  unlawful  acts;  and  I  entertain  no  doubt  that  a  com- 
bination to  procure  people  to  do  such  acts  is  a  conspiracy  and 
unlawful. 

The  sending  up  of  ships  to  Hankow,  which  in  itself,  and  to 
the  knowledge  of  the  associated  traders,  would  be  unprofit- 
able, but  was  done  for  the  purpose  of  influencing  other  traders 
against  coming  there  and  so  encouraging  a  ruinous  competi- 
tion, is  the  one  fact  which  appears  to  be  pointed  to  as  out  of 
the  ordinary  course  of  trade.  My  Lords,  after  all,  what  can 
be  meant  by  "out  of  the  ordinary  course  of  trade"?  I  should 
rather  think,  as  a  fact,  that  it  is  very  commonly  within  the 
ordinary  course  of  trade  so  to  compete  for  a  time  as  to  render 
trade  unprofitable  to  your  rival  in  order  that  when  you  have 
got  rid  of  him  you  may  appropriate  the  profits  of  the  entire 
trade  to  yourself. 

I  entirely  adopt  and  make  my  own  what  was  said  by  Lord 


THE  COMMON  LAW  315 

Justice  Bowen  in  the  Court  below:  "All  commercial  men 
with  capital  are  acquainted  with  the  ordinary  expedient  of 
sowing  one  year  a  crop  of  apparently  unfruitful  prices,  in 
order  by  driving  competition  away  to  reap  a  fuller  harvest 
of  profit  in  the  future ;  and  until  the  present  argument  at  the 
Bar  it  may  be  doubted  whether  shipowners  or  merchants 
were  ever  deemed  to  be  bound  by  law  to  conform  to  some 
imaginary  'normal'  standard  of  freights  or  prices,  or  that  law 
courts  had  a  right  to  say  to  them  in  respect  of  their  com- 
petitive tariffs,  'Thus  far  shalt  thou  go,  and  no  further.'  " 

Excluding  all  I  have  excluded  upon  my  view  of  the  facts, 
it  is  very  difficult  indeed  to  formulate  the  proposition.  What 
is  the  wrong  done?  What  legal  right  is  interfered  with? 
What  coercion  of  the  mind,  or  will,  or  of  the  person  is  ef- 
fected? All  are  free  to  trade  upon  what  terms  they  will,  and 
nothing  has  been  done  except  in  rival  trading  which  can  be 
supposed  to  interfere  with  the  appellants'  interests. 

I  think  this  question  is  the  first  to  be  determined :  What 
injury,  if  any,  has  been  done?  What  legal  right  has  been 
interfered  with?  Because  if  no  legal  right  has  been  interfered 
with,  and  no  legal  injury  inflicted,  it  is  vain  to  say  that  the 
thing  might  have  been  done  by  an  individual,  but  cannot  be 
done  by  a  combination  of  persons.  My  Lords,  I  do  not  deny 
that  there  are  many  things  which  might  be  perfectly  lawfully 
done  by  an  individual,  which,  when  done  by  a  number  of 
persons,  become  unlawful.  I  am  unable  to  concur  with  the 
Lord  Chief  Justice's  criticism  [21  Q.  B.  D.  551]  (if  its  mean- 
ing was  rightly  interpreted,  which  I  very  much  doubt)  on 
the  observations  made  by  my  noble  and  learned  friend.  Lord 
Bramwell,  in  Reg.  v.  Druitt  [10  Cox,  C.  C.  592],  if  that  was 
intended  to  treat  as  doubtful  the  proposition  that  a  com- 
bination to  insult  and  annoy  a  person  would  be  an  indictable 
conspiracy.  I  should  have  thought  it  as  beyond  doubt  or 
question  that  such  a  combination  would  be  an  indictable 
misdemeanor,  and  I  cannot  think  the  Chief  Justice  meant  to 
throw  any  doubt  upon  such  a  proposition. 

But  in  this  case  the  thing  done,  the  trading  by  a  number 
of  persons  together,  effects  no  more  and  is  no  more,  so  to 
speak,  a  combined  operation  than  that  of  a  single  person.  If 
the    thing    done    is   rendered   unlawful    by    combination,   the 


316    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

course  of  trade  by  a  person  who  singly  trades  for  his  own 
benefit  and  apart  from  partnership  or  sharing  profits  with 
others,  but  nevertheless  avails  himself  of  combined  action, 
would  be  open  to  the  same  objections.  The  merchant  who 
buys  for  him,  the  agent  who  procures  orders  for  him,  the 
captain  who  sails  his  ship,  and  even  the  sailors  (if  they  might 
be  supposed  to  have  knowledge  of  the  transaction)  would  be 
acting  in  combination  for  the  general  result,  and  would, 
whether  for  the  benefit  of  the  individual,  or  for  an  associated 
body  of  traders,  make  it  not  the  less  combined  action  than  if 
the  combination  were  to  share  profits  with  independent  trad- 
ers ;  and  if  a  combination  to  effect  that  object  would  be  unlaw- 
ful, the  sharers  in  the  combined  action  could,  in  a  charge  of 
criminal  conspiracy,  make  no  defense  that  they  were  captain, 
agent,  or  sailors,  respectively,  if  they  were  knowingly  render- 
ing their  aid  to  what,  by  the  hypothesis,  would  be  unlawful 
if  done  in  combination, 

A  totally  separate  head  of  unlawfulness  has,  however,  been 
introduced  by  the  suggestion  that  the  thing  is  unlawful  be- 
cause in  restraint  of  trade.  There  are  two  senses  in  which 
the  word  "unlawful"  is  not  uncommonly,  though,  I  think, 
somewhat  inaccurately  used.  There  are  some  contracts  to 
which  the  law  will  not  give  effect;  and  therefore,  although 
the  parties  may  enter  into  what,  but  for  the  element  which 
the  law  condenms,  would  be  perfect  contracts,  the  law  would 
not  allow  them  to  operate  as  contracts,  notwithstanding  that, 
in  point  of  form,  the  parties  have  agreed.  Some  such  con- 
tracts may  be  void  on  the  ground  of  immorality ;  some  on  the 
ground  that  they  are  contrary  to  public  policy;  as,  for  ex- 
ample, in  restraint  of  trade:  and  contracts  so  tainted  the  law 
will  not  lend  its  aid  to  enforce.  It  treats  them  as  if  they  had 
not  been  made  at  all.  But  the  more  accurate  use  of  the  word 
"unlawful,"  which  would  bring  the  contract  within  the 
qualification  which  I  have  quoted  from  the  judgment  of  the 
Exchequer  Chamber,  namely,  as  contrary  to  law,  is  not  ap- 
plicable to  such  contracts. 

It  has  never  been  held  that  a  contract  in  restraint  of  trade 
is  contrary  to  law  in  the  sense  that  I  have  indicated.  A  judge 
in  very  early  times  expressed  great  indignation  at  such  a 
contract;    and   Mr.    Justice    Crompton   undoubtedly   did   say 


THE  COMMON  LAW  317 

(in  a  case  where  such  an  observation  was  wholly  unnecessary 
to  the  decision,  and  therefore  manifestly  obiter),  that  the 
parties  to  a  contract  in  restraint  of  trade  would  be  indictable. 
I  am  unable  to  assent  to  that  dictum.  It  is  opposed  to  the 
whole  current  of  authority;  it  was  dissented  from  by  Lord 
Campbell  and  Chief  Justice  Erie,  and  found  no  support  when 
the  case  in  which  it  was  said  came  to  the  Exchequer  Chamber, 
and  it  seems  to  me  contrary  to  principle. 

In  the  result,  I  think  that  no  case  whatever  is  made  out  of 
a  conspiracy  such  as  the  appellants  here  undertook  to  estab- 
lish; and  it  is  not  unimportant,  for  the  reasons  I  have  given, 
to  see  what  is  the  conspiracy  alleged  in  the  statement  of 
claim.  The  first  paragraph  alleges  the  conspiracy  to  be  "to 
prevent  the  plaintiffs  from  obtaining  cargoes  for  steamers 
owned  by  the  plaintiffs."  The  word  "prevent"  is  sufficiently 
wide  to  comprehend  both  lawful  means  and  unlawful;  but  as 
I  have  already  said,  in  proof  there  is  nothing  but  the  com- 
petition with  which  I  have  dealt. 

The  second  paragraph  alleges  that  in  pursuance  of  the  con- 
spiracy people  were  "bribed,  coerced,  and  induced  to  agree  to 
forbear  and  to  forbear  from  shipping  cargoes  by  the  steamers 
of  the  plaintiffs." 

If  the  word  "bribed"  is  satisfied  by  the  offering  lower 
freights  and  larger  discounts,  then  that  is  proved;  but  then 
the  word  "bribed"  is  robbed  of  any  legal  significance. 
"Coerced"  is  not  justified  by  any  evidence  in  the  case,  and  the 
word  "induced"  is  absolutely  neutral,  and  no  unlawful  induce- 
ment is  proved. 

The  third  paragraph  uses  language  such  as  "intention  to 
injure  the  plaintiffs,"  "threats  of  stopping  the  shipment  of 
homeward  cargoes,"  and  the  like.  But  I  ask  myself  whether 
if  the  indictment  had  set  out  the  facts  without  using  the  am- 
biguous language  to  which  I  have  referred  in  the  statement  of 
claim,  it  would  have  disclosed  an  indictable  offense?  I  am 
very  clearly  of  opinion  it  would  not. 

I  am  of  opinion,  therefore,  that  the  whole  matter  comes  round 
to  the  original  proposition,  whether  a  combination  to  trade, 
and  to  offer,  in  respect  of  prices,  discounts,  and  other  trade 
facilities,  such  terms  as  will  win  so  large  an  amount  of  custom 


318    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

as  to  render  it  unprofitable  for  rival  customers  to  pursue  the 
same  trade  is  unlawful,  and  I  am  clearly  of  opinion  that  it  is  not. 
I  think,  therefore,  that  the  appeal  ought  to  be  dismissed 
with  costs,  and  I  so  move  your  Lordships. 

LORD  WATSON :  My  Lords,  at  the  hearing  of  this  appeal 
in  April  last,  your  Lordships  had  the  benefit  of  listening  to  a 
learned  and  exhaustive  discussion  of  the  law  applicable  to 
combination  or  conspiracy.  It  appeared  to  me  at  the  time, 
and  further  consideration  has  confirmed  my  impression,  that 
much  of  the  legal  argument  addressed  to  us  had  a  very  dis- 
tant relation  to  the  circumstances  of  the  present  case,  which 
are  simple  enough.  The  evidence,  oral  and  documentary,  con- 
tains an  unusual  amount  of  figurative  language,  indicating  a 
wide  difference  of  opinion  as  to  the  legal  aspect  of  the  facts, 
but  presents  no  conflict  in  regard  to  the  facts  themselves. 

The  respondents  are  firms  and  companies  owning  steam 
vessels  which  ply  regularly,  during  the  whole  year,  some  of 
them  on  the  Great  River  of  China  between  Hankow  and  Shang- 
hai, and  others  between  Shanghai  and  European  ports.  Dur- 
ing the  tea  season,  which  begins  in  May  and  lasts  for  about 
six  weeks,  most  shippers  prefer  to  have  their  tea  sent  direct 
from  Hankow  to  Europe;  but  it  suits  the  respondents'  trade 
better  to  have  the  tea  which  they  carry  brought  down  to 
Shanghai  by  their  ordinary  river  service,  and  then  transhipped 
for  Europe.  Accordingly  they  do  not  send  their  ocean  steam- 
ers up  the  river,  except  when  they  find  it  necessary  in  order 
to  intercept  cargoes  which  might  otherwise  have  been  shipped 
from  Hankow  in  other  than  their  vessels. 

The  appellants  are  also  a  ship-owning  company.  Thisy  do 
not  maintain  a  regular  service  either  on  the  Great  River  or 
between  Europe  and  Hankow;  but  they  send  vessels  to  Han- 
kow during  the  tea  season,  with  the  legitimate  object  of  shar- 
ing in  the  profits  of  the  tea-carrying  trade,  which  appear,  in 
ordinary  circumstances,  to  have  been  considerable. 

The  respondents  entered  into  an  agreement,  the  avowed 
purpose  of  which  was  to  secure  for  themselves  as  much  of  the 
tea  shipped  from  Hankow  as  their  vessels  could  conveniently 
carry,  which  was  practically  the  whole  of  it,  and  to  prevent 


THE  COMMON  LAW  319 

the  appellants  and  other  outsiders  from  obtaining  a  share  of 
the  trade. 

The  consequence  of  their  acting  upon  the  agreement  was 
that  the  appellants,  having  sent  their  ships  to  Hankow,  were 
unable  to  obtain  cargoes  at  remunerative  rates ;  and  they  claim 
as  damages  due  to  them  by  the  respondents,  the  difference  be- 
tween their  actual  earnings  and  the  freights  which  their  ves- 
sels might  have  earned  had  it  not  been  for  the  combined  action 
of  the  respondents.  As  the  law  is  now  settled,  I  apprehend 
that  in  order  to  substantiate  their  claim,  the  appellants  must 
shew,  either  that  the  object  of  the  agreement  was  unlawful, 
or  that  illegal  methods  were  resorted  to  in  its  prosecution.  If 
neither  the  end  contemplated  by  the  agreement,  nor  the  means 
used  for  its  attainment  were  contrary  to  law,  the  loss  suffered 
by  the  appellants  was  damnum  sine  injuria. 

The  agreement  of  which  the  appellants  complain  left  the 
contracting  parties  free  to  recede  from  it  at  their  pleasure, 
and  is  not  obnoxious  to  the  rule  of  public  policy,  which  was 
recognized  in  Hilton  v.  Eckersley  [6  E.  &  B.  47].  The  decision 
in  that  case,  which  was  the  result  of  judicial  opinions  not  alto- 
gether reconcilable,  appears  to  me  to  carry  the  rule  no  farther 
than  this — that  an  agreement  by  traders  to  combine  for  a  law- 
ful purpose,  and  for  a  specified  time,  is  not  binding  upon  any 
of  the  parties  to  it  if  he  chooses  to  withdraw,  and  consequently 
cannot  be  enforced  in  invituni.  In  my  opinion  it  is  not  an 
authority  for  the  proposition  that  an  outsider  can  plead  the 
illegality  of  such  a  contract,  whilst  the  parties  are  willing  to 
act,  and  continue  to  act  upon  it.  I  venture  to  think  that  the 
decision  of  this  appeal  depends  upon  more  tangible  considera- 
tions than  any  which  could  be  derived  from  the  study  of  what 
is  generally  known  as  public  policy. 

There  is  nothing  in  the  evidence  to  suggest  that  the  parties 
to  the  agreement  had  any  other  object  in  view  than  that  of 
defending  their  carrying-trade  during  the  tea  season  against 
the  encroachments  of  the  appellants  and  other  competitors, 
and  of  attracting  to  themselves  custom  which  might  otherwise 
have  been  carried  off  by  these  competitors.  That  is  an  object 
which  is  strenuously  pursued  by  merchants  great  and  small  in 
every  branch  of  commerce ;  and  it  is,  in  the  eye  of  the  law, 
perfectly   legitimate.      If   the   respondents'   combination   had 


320    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

been  formed,  not  with  a  single  view  to  the  extension  of  their 
business  and  the  increase  of  its  profits,  but  with  the  main  or 
ulterior  design  of  effecting  an  unlawful  object,  a  very  differ- 
ent question  would  have  arisen  for  the  consideration  of  your 
Lordships.  But  no  such  case  is  presented  by  the  facts  dis- 
closed in  this  appeal. 

The  object  of  the  combination  being  legal,  was  any  illegal 
act  committed  by  the  respondents  in  giving  effect  to  it?  The 
appellants  invited  your  Lordships  to  answer  that  question  in 
the  affirmative,  on  the  ground  that  the  respondents'  competi- 
tion was  unfair,  by  which  they  no  doubt  meant  that  it  was 
tainted  by  illegality.  The  facts  which  they  mainly  relied  on 
were  these:  that  the  respondents  allowed  a  discount  of  5  per 
cent,  upon  their  freight  accounts  for  the  year  to  all  customers 
who  shipped  no  tea  to  Europe  except  by  their  vessels;  that, 
whenever  the  appellants  sent  a  ship  to  load  tea  at  Hankow, 
the  respondents  sent  one  or  more  of  their  ocean  steamers  to 
underbid  her,  so  that  neither  vessel  could  obtain  cargo  on 
remunerative  terms;  and  lastly,  that  the  respondents  took 
away  the  agency  of  their  vessels  from  persons  who  also  acted 
as  shipping  agents  for  the  appellants  and  other  trade  com- 
petitors outside  the  combination. 

I  cannot  for  a  moment  suppose  that  it  is  the  proper  function 
of  English  Courts  of  Law  to  fi:x  the  lowest  prices  at  which 
traders  can  sell  or  hire,  for  the  purpose  of  protecting  or  ex- 
tending their  business,  without  committing  a  legal  wrong 
which  will  subject  them  in  damages.  Until  that  becomes  the 
law  of  the  land,  it  is,  in  my  opinion,  idle  to  suggest  that  the 
legality  of  mercantile  competition  ought  to  be  gauged  by  the 
amount  of  the  consideration  for  which  a  competing  trader 
thinks  fit  to  part  with  his  goods  or  to  accept  employment. 
The  withdrawal  of  agency  at  first  appeared  to  me  to  be  a 
matter  attended  with  difficulty;  but  on  consideration,  I  am 
satisfied  that  it  cannot  be  regarded  as  an  illegal  act.  In  the 
first  place,  it  was  impossible  that  any  honest  man  could  im- 
partially discharge  his  duty  of  finding  freights  to  parties  who 
occupied  the  hostile  position  of  the  appellants  and  respond- 
ents; and,  in  the  second  place,  the  respondents  gave  the  agents 
the  option  of  eontinuing  to  act  for  one  or  other  of  them  in 
circumstances  which  placed  the  appellants  at  no  disadvantage. 


THE  COMMON  LAW  321 

My  Lords,  in  this  case  it  has  not  been  proved,  and  it  has  not 
been  suggested,  that  the  respondents  used  either  misrepresen- 
tation or  compulsion  for  the  purpose  of  attaining  the  object 
of  their  combination.  The  only  means  by  which  they  en- 
deavoured to  obtain  shipments  for  their  vessels,  to  the  exclusion 
of  others,  was  the  inducement  of  cheaper  rates  of  freight  than 
the  appellants  were  willing  to  accept.  I  entertain  no  doubt 
that  the  judgment  appealed  from  ought  to  be  affirmed.  I  am 
quite  satisfied  with  the  reasons  assigned  for  it  by  Bowen 
and  Fry,  L.  JJ.  ;  and  the  observ^ations  which  I  have  made  were 
not  meant  to  add  to  these  reasons,  but  to  make  it  clear  that 
in  my  opinion  the  appellants  have  presented  for  decision  no 
question  of  fact  or  law  attended  with  either  doubt  or  difficulty. 

LORD  MACNAGHTEN :  My  Lords,  the  judgment  which  I 
am  about  to  read  is  the  judgment  of  my  noble  and  learned 
friend  Lord  Bramwell,  who  is  unable  to  be  present  here 
this  morning  and  has  asked  me  to  read  it  for  him. 

LORD  BRAMWELL:  My  Lords,  the  plaintiffs  in  this  case 
do  not  complain  of  any  trespass,  violence,  force,  fraud,  or 
breach  of  contract,  nor  of  any  direct  tort  or  violation  of  any 
right  of  the  plaintiffs,  like  the  case  of  firing  to  frighten  birds 
from  a  decoy;  nor  of  any  act,  the  ultimate  object  of  which 
was  to  injure  the  plaintiffs,  having  its  origin  in  malice  or  ill- 
will  to  them.  The  plaintiffs  admit  that  materially  and  morally 
they  have  been  at  liberty  to  do  their  best  for  themselves  with- 
out any  impediment  by  the  defendants.  But  they  say  that  the 
defendants  have  entered  into  an  agreement  in  restraint  of 
trade ;  an  agreement,  therefore,  unlawful ;  an  agreement,  there- 
fore, indictable,  punishable;  that  the  defendants  have  acted 
in  conformity  with  that  unlawful  agreement,  and  thereby 
caused  damage  to  the  plaintiffs  in  respect  of  w^hich  they  are 
entitled  to  bring,  and  bring  this  action. 

The  plaintiffs  have  proved  an  agreement  among  the  de- 
fendants, the  object  of  which  was  to  prevent  shipowners, 
other  than  themselves,  from  trading  to  Shanghai  and  Hankow. 
The  way  in  which  that  was  to  be  accomplished  was  by  giving 
benefits  to  those  who  shipped  exclusively  by  them,  by  sending 
vessels  to  compete  with  the  plaintiffs',  and  by  lowering  their, 

Kales  R.  of  T.  Vol.  1—21 


322    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  defendants',  rates  of  freight  so  that  the  plaintiffs  had  to 
lower  theirs  to  their  great  loss.  There  are  other  matters  al- 
leged, but  they  are  accessorial  to  the  above,  which  is  the 
substance  of  the  complaint. 

The  plaintiffs  also  say  that  these  things,  or  some  of  them, 
if  done  by  an  individual,  would  be  actionable.  This  need  not 
be  determined  directly,  because  all  the  things  complained  of 
have  their  origin  in  what  the  plaintiffs  say  is  unlawfulness,  a 
conspiracy  to  injure ;  so  that  if  actionable  when  done  by  one, 
much  more  are  they  when  done  by  several,  and  if  not  action- 
able when  done  by  several,  certainly  they  are  not  when  done 
by  one.  It  has  been  objected  by  capable  persons,  that  it  is 
strange  that  that  should  be  unlawful  if  done  by  several  which 
is  not  if  done  by  one,  and  that  the  thing  is  wrong  if  done  by 
one,  if  wrong  when  done  by  several ;  if  not  wrong  when  done 
by  one,  it  cannot  be  when  done  by  several.  I  think  there  is  an 
obvious  answer,  indeed  two ;  one  is,  that  a  man  may  encounter 
the  acts  of  a  single  person,  yet  not  be  fairly  matched  against 
several.  The  other  is,  that  the  act  when  done  by  an  individual 
is  wrong  though  not  punishable,  because  the  law  avoids  the 
multiplicity  of  crimes:  de  minimis  non  curat  lex;  while  if 
done  by  several  it  is  sufficiently  important  to  be  treated  as  a 
crime.  Let  it  be,  then,  that  it  is  no  answer  to  the  plaintiffs' 
complaint  that  if  what  they  complain  of  had  been  done  by  an 
individual  there  would  be  no  cause  of  action.  There  is  the 
further  question  whether  there  is  a  cause  of  action,  the  acts 
being  done  by  several. 

The  first  position  of  the  plaintiffs  is  that  the  agreement 
among  the  defendants  is  illegal  as  being  in  restraint  of  trade, 
and  therefore  against  public  policy,  and  so  illegal.  "Public 
policy,"  said  Burrough,  J.  (I  believe,  quoting  Hobart,  C. 
J.),  "is  an  unruly  horse,  and  dangerous  to  ride."  [Richard- 
son v.  Hellish,  2  Bing.  at  p.  252.]  I  quote  also  another  dis- 
tinguished judge,  more  modern.  Cave,  J. :  "  Certain  kinds 
of  contracts  have  been  held  void  at  Common  Law  on  the 
ground  of  public  policy ;  a  branch  of  the  law,  however,  which 
certainly  should  not  be  extended,  as  judges  are  more  to  be 
trusted  as  interpreters  of  the  law  than  as  expounders  of  what 
is  called  public  policy."  [(1891)  1  Q.  B.  595.]  I  think  the 
present  case  is  an  illustration  of  the  wisdom  of  these  remarks. 


THE  COMMON  LAW  323 

I  venture  to  make  another.  No  evidence  is  given  in  these 
public  policy  cases.  The  tribunal  is  to  say,  as  matter  of  law, 
that  the  thing  is  against  public  policy,  and  void.  How  can 
the  judge  do  that  without  any  evidence  as  to  its  effect  and 
consequences?  If  the  shipping  in  this  case  was  sufficient  for 
the  trade,  a  further  supply  would  have  been  a  waste.  There 
are  some  people  who  think  that  the  public  is  not  concerned 
with  this — people  who  would  make  a  second  railway  by  the 
side  of  one  existing,  saying  "only  the  two  companies  will 
suffer, ' '  as  though  the  wealth  of  the  community  was  not  made 
up  of  the  wealth  of  the  individuals  who  compose  it.  I  am  by 
no  means  sure  that  the  conference  did  not  prevent  a  waste, 
and  was  not  good  for  the  public.  Lord  Coleridge  thought  it 
was — see  his  judgment. 

As  to  the  suggestion  that  the  Chinese  profited  by  the  lower- 
ing of  freights,  I  cannot  say  it  was  not  so.  There  may  have 
been  a  monopoly  or  other  cause  to  give  them  a  benefit;  but, 
as  a  rule,  it  is  clear  that  the  expense  of  transit,  and  all  other 
expenses,  borne  by  an  exported  article  that  has  a  market 
price,  are  borne  by  the  importer,  therefore,  ultimately,  by  the 
consumer.  So  that  low  freights  benefit  him.  To  go  on  with 
the  case,  take  it  that  the  defendants  had  bound  themselves  to 
each  other;  I  think  they  had,  though  they  might  withdraw. 
Let  it  be  that  each  member  had  tied  his  hands;  let  it  be  that 
that  w^as  in  restraint  of  trade;  I  think  upon  the  authority  of 
Hilton  V.  Eckersiey  [6  E.  &  B.  47],  and  other  cases,  we  should 
hold  that  the  agreement  was  illegal,  that  is,  not  enforceable 
by  law.  I  will  assume,  then,  that  it  was,  though  I  am  not 
quite  sure.  But  that  is  not  enough  for  the  plaintiffs.  To  main- 
tain their  action  on  this  ground  they  must  make  out  that  it 
was  an  offence,  a  crime,  a  misdemeanor.  I  am  clearly  of  opin- 
ion it  was  not.  Save  the  opinion  of  Crompton,  J.  (entitled 
to  the  greatest  respect,  but  not  assented  to  by  Lord  Camp- 
bell or  the  Exchequer  Chamber),  there  is  no  authority  for  it 
in  the  English  law. 

It  is  quite  certain  that  an  agreement  may  be  void,  yet  the 
parties  to  it  not  punishable.  Take  the  case  I  put  during  the 
argument:  a  man  and  woman  agree  to  live  together  as  man 
and  wife,  without  marrying.  The  agreement  is  illegal,  and 
could  not  be  enforced,  but  clearly  the  parties  to  it  would  not 


324    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

be  indictable.  It  ought  to  be  enough  to  say  that  the  fact  that 
there  is  no  ease  where  there  has  been  a  conviction  for  such  an 
offense  as  is  alleged  against  the  defendants  is  conclusive. 

It  is  to  be  remembered  that  it  is  for  the  plaintiffs  to  make 
out  the  case  that  the  defendants  have  committed  an  indictable 
oft'ence,  not  for  the  defendants  to  disprove  it.  There  needs  no 
argument  to  prove  the  negative.  There  are  some  observations 
to  be  made.  It  is  admitted  that  there  may  be  fair  competition 
in  trade,  that  two  may  offer  to  join  and  compete  against  a 
third.  If  so,  what  is  the  definition  of  "fair  competition"? 
What  is  unfair  that  is  neither  forcible  nor  fraudulent?  It 
does  seem  strange  that  to  enforce  freedom  of  trade,  of  action, 
the  law  should  punish  those  who  make  a  perfectly  honest 
agreement  with  a  belief  that  it  is  fairly  required  for  their 
protection. 

There  is  one  thing  that  is  to  me  decisive.  I  have  always 
said  that  a  combination  of  workmen,  an  agreement  among 
them  to  cease  work  except  for  higher  wages,  and  a  strike  in 
consequence,  was  lawful  at  common  law ;  perhaps  not  enforce- 
able inter  se,  but  not  indictable.  The  Legislature  has  now  so 
declared.  The  enactment  is  express,  that  agreements  among 
workmen  shall  be  binding,  whether  they  would  or  would  not, 
but  for  the  acts,  have  been  deemed  unlawful,  as  in  restraint  of 
trade.  Is  it  supposable  that  it  would  have  done  so  in  the  way 
it  has,  had  the  workmen's  combination  been  a  punishable  mis- 
demeanor? Impossible.  This  seems  to  me  conclusive,  that 
though  agreements  which  fetter  the  freedom  of  action  in  the 
parties  to  it  may  not  be  enforceable,  they  are  not  indictable. 
See  also,  the  judgment  of  Fry,  L.  J.,  on  this  point.  Where  is 
such  a  contention  to  stop?  Suppose  the  case  put  in  the  argu- 
ment :  In  a  small  town  there  are  two  shops,  sufficient  for  the 
wants  of  the  neighborhood,  making  only  a  reasonable  profit. 
They  are  threatened  with  a  third.  The  two  shopkeepers  agree 
to  warn  the  intending  shopkeeper  that  if  he  comes  they  will 
lower  prices,  and  can  afford  it  longer  than  he.  Have  they 
committed  an  indictable  offence?  Remember  the  conspiracy 
is  the  offence,  and  they  have  conspired.  If  he,  being  warned, 
does  not  set  up  his  shop,  has  he  a  cause  of  action?  He  might 
prove  damages.  He  might  shew  that  from  his  skill  he  would 
have  beaten  one  or  both  of  the  others.     See  in  this  case  the 


THE  COMMON  LAW  325 

judgment  of  Lord  Esher,  that  the  plaintiffs  might  recover 
for  "damages  at  large  for  future  years."  Would  a  ship 
owner  who  had  intended  to  send  his  ship  to  Shanghai,  but 
desisted  owing  to  the  defendants'  agreement,  and  on  being 
told  by  them  they  would  deal  with  him  as  they  had  with  the 
plaintiffs,  be  entitled  to  maintain  an  action  against  the  de- 
fendants? Why  not?  If  yes,  why  not  every  shipowner  who 
could  say  he  had  a  ship  fit  for  the  trade,  but  was  deterred 
from  using  it? 

The  Master  of  the  Eolls  cites  Sir  William  Erie,  that  "a 
combination  to  violate  a  private  right  in  which  the  public  has 
a  sufficient  interest  is  a  crime,  such  violation  being  an  action- 
able wrong."  True,  Sir  William  Erie  means  that  where  the 
violation  of  a  private  right  is  an  actionable  wrong,  a  combina- 
tion to  violate  it,  if  the  public  has  a  sufficient  interest,  is  a 
crime.  But  in  this  case,  I  hold  that  there  is  no  private  right 
violated.  His  Lordship  further  says:  "If  one  goes  beyond 
the  exercise  of  the  course  of  trade,  and  does  enact  beyond 
what  is  the  course  of  trade,  in  order — that  is  to  say,  with  in- 
tent— to  molest  the  other's  free  course  of  trade,  he  is  not 
exercising  his  own  freedom  of  a  course  of  trade,  he  is  not  act- 
ing in  but  beyond  the  course  of  trade,  and  then  it  follow^ 
that  his  act  is  an  unlawful  obstruction  of  the  other's  right  to 
a  free  course  of  trade,  and  if  such  obstruction  causes  damage 
to  the  other  he  is  entitled  to  maintain  an  action  for  the  wrong. ' ' 
[23  Q.  B.  D.  607.]  I  may  be  permitted  to  say  that  this  is  not 
very  plain.  I  think  it  means  that  it  is  not  in  the  course  of 
trade  for  one  trader  to  do  acts  the  motive  of  which  is  to  dam- 
age the  trade  of  another.  Whether  I  should  agree  depends  on 
the  meaning  to  be  put  on  "course  of  trade"  and  "molest." 
But  it  is  clear  that  the  Master  of  the  Rolls  means  conduct 
which  would  give  a  cause  of  action  against  an  individual.  He 
cites  Sir  William  Erie  in  support  of  his  proposition,  who 
clearly  is  speaking  of  acts  which  would  be  actionable  in  an 
individual,  and  there  is  no  such  act  here. 

The  Master  of  the  Rolls  says  the  lowering  of  the  freight  far 
beyond  a  lowering  for  any  purpose  of  trade  was  not  an  act 
done  in  the  exercise  of  their  own  free  right  of  trade,  but  for 
the  purpose  of  interfering  with  the  plaintiffs'  right  to  a  free 
course  of  trade;  therefore  a  wrongful  act  as  against  the  plain- 


326    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

tiffs'  right;  and  as  injury  to  the  plaintiffs  followed,  they  had 
a  right  of  action.  I  cannot  agree.  If  there  were  two  shop- 
keepers in  a  village  and  one  sold  an  article  at  cost  price,  not 
for  profit  therefore,  but  to  attract  customers  or  cause  his  rival 
to  leave  off  selling  the  article  only,  it  could  not  be  said  he  was 
liable  to  an  action,  I  cannot  think  that  the  defendants  did 
more  than  they  had  a  legal  right  to  do.  I  adopt  the  vigorous 
language  and  opinion  of  Fry,  L.  J. :  "To  draw  a  line  be- 
tween fair  and  unfair  competition,  between  what  is  reasonable 
and  unreasonable,  passes  the  power  of  the  courts."  [23  Q.  B. 
D.  625,  626.]  It  is  a  strong  thing  for  the  plaintiffs  to  complain 
of  the  very  practices  they  wished  to  share  in,  and  once  did. 
J  am  of  opinion  that  the  judgment  should  be  affirmed, 

LORD  MACNAGHTEN:  My  Lords,  for  myself  I  agree 
entirely  in  the  motion  which  has  been  proposed,  and  in  the 
reasons  assigned  for  it  in  the  judgments  which  have  been  deliv- 
ered and  in  those  which  are  yet  to  be  delivered;  and  I  do  not 
think  I  can  usefully  add  anything  of  my  own. 

LORD  MORRIS :  My  Lords,  the  facts  of  this  case  demon- 
strate that  the  defendants  had  no  other,  or  further,  object  than 
to  appropriate  the  trade  of  the  plaintiffs.  The  means  used 
were:  firstly,  a  rebate  to  those  who  dealt  exclusively  with 
them ;  secondly,  the  sending  of  ships  to  compete  with  the  plain- 
tiffs'  ships;  thirdly,  the  lowering  of  the  freights;  fourthly,  the 
indemnifying  other  vessels  that  would  compete  with  the  plain- 
tiffs'; fifthly,  the  dismissal  of  agents  who  were  acting  for 
them  and  the  plaintiffs. 

The  object  was  a  lawful  one.  It  is  not  illegal  for  a  trader 
to  aim  at  driving  a  competitor  out  of  trade,  provided  the 
motive  be  his  own  gain  by  appropriation  of  the  trade,  and  the 
means  he  uses  be  lawful  weapons.  Of  the  first  four  of  the 
means  used  by  the  defendants,  the  rebate  to  customers  and 
the  lowering  of  the  freights  are  the  same  in  principle,  being 
a  bonus  by  the  defendants  to  customers  to  come  and  deal  ex- 
clusively with  them.  The  sending  of  ships  to  compete,  and 
the  indemnifying  other  ships,  was  "the  competition"  entered 
on  by  the  defendants  with  the  plaintiffs.  The  fifth  means 
used,  viz.,  the  dismissal  of  agents,  might  be  questionable  ac- 


THE  COMMON  LAW  327 

cording  to  the  circumstances;  but  in  the  present  case,  the 
agents  filled  an  irreconcilable  position  in  being  agents  for 
the  two  rivals,  the  plaintiffs  and  the  defendants.  Dismissal 
under  such  circumstances  became,  perhaps,  a  necessary  inci- 
dent of  the  warfare  in  trade. 

All  the  acts  done,  and  the  means  used,  by  the  defendants 
were  acts  of  competition  for  the  trade.  There  was  nothing  in 
the  defendants'  acts  to  disturb  any  existing  contract  of  the 
plaintiffs,  or  to  induce  any  one  to  break  such.  Their  action 
was  aimed  at  making  it  unlikely  that  any  one  would  enter 
into  contracts  with  the  plaintiffs,  the  defendants  offering  such 
competitive  inducements  as  would  probably  prevent  them. 
The  use  of  rhetorical  phrases  in  the  correspondence  cannot 
affect  the  real  substance  and  meaning  of  it. 

Again,  what  one  trader  may  do  in  respect  of  competition,  a 
body  or  set  of  traders  can  lawfully  do ;  otherwise  a  large 
capitalist  could  do  what  a  number  of  small  capitalists,  com- 
bining together,  could  not  do,  and  thus  a  blow  would  be 
struck  at  the  very  principle  of  co-operation  and  joint-stock 
enterprise.  I  entertain  no  doubt  that  a  body  of  traders,  whose 
motive  object  is  to  promote  their  own  trade,  can  combine  to 
acquire,  and  thereby  in  so  far  to  injure  the  trade  of  competi- 
tors, provided  they  do  no  more  than  is  incident  to  such  motive 
object,  and  use  no  unlawful  means.  And  the  defendants'  case 
clearly  comes  with  the  principle  I  have  stated. 

Now,  as  to  the  contention  that  the  combination  was  in  re- 
straint of  trade,  and  therefore  illegal.  In  the  first  place,  was 
it  in  restraint  of  trade?  It  was  a  voluntary  combination.  It 
was  not  to  continue  for  any  fixed  period,  nor  was  there  any 
penalty  attached  to  a  breach  of  the  engagement.  The  opera- 
tion of  attempting  to  exclude  others  from  the  trade  might  be, 
and  was,  in  fact,  beneficial  to  freighters.  Whenever  a  monop- 
oly was  likely  to  arise,  with  a  consequent  rise  of  rates,  com- 
petition would  naturally  arise. 

I  cannot  see  why  judges  should  be  considered  specially 
gifted  with  prescience  of  what  may  hamper  or  what  may  in- 
crease trade,  or  of  what  is  to  be  the  test  of  adequate  remunera- 
tion. In  these  days  of  instant  communication  with  almost  all 
parts  of  the  world  competition  is  the  life  of  trade,  and  I  am  not 
aware  of  any  stage  of  competition  called  "fair"  intermediate 


328    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

between  lawful  and  unlawful.  The  question  of  "fairness" 
would  be  relegated  to  the  idiosyncrasies  of  individual  judges. 
I  can  see  no  limit  to  competition,  except  that  you  shall  not 
invade  the  rights  of  another. 

But  suppose  the  combination  in  this  case  was  such  as  might 
be  held  to  be  in  restraint  of  trade,  what  follows?  It  could  not 
be  enforced.  None  of  the  parties  to  it  could  sue  each  other. 
It  might  be  held  void,  because  its  tendency  might  be  held  to 
be  against  the  public  interest.  Does  that  make,  per  se,  the 
combination  illegal?  What  a  fallacy  would  it  be  that  what 
is  void  and  not  enforceable  becomes  a  crime ;  and  cases  abound 
of  agreements  which  the  law  would  not  enforce,  but  which  are 
not  illegal;  which  you  may  enter  into,  if  you  like,  but  which 
you  will  not  get  any  assistance  to  enforce. 

My  Lords,  I  have  merely  summarized  my  views,  because  I 
adopt  entirely  the  principles  laid  down  by  Lord  Justice 
Bowen  in  his  judgment  with  such  felicitous  illustrations,  and 

I  concur  in  the  opinion  already  announced  by  your  Lordships, 
that  the  judgment  of  the  Court  of  Appeal  should  be  affirmed. 

LORD  FIELD :  My  Lords,  I  think  that  this  appeal  may  be 
decided  upon  the  principles  laid  down  by  Holt,  C.  J.,  as  far 
back  as  the  case  of  Keeble  v.  Hickeringill,  cited  for  the  ap- 
pellants.    [11  Mod.  74,  131,  and  note  to  Carrington  v.  Taylor, 

II  Eas't.  574.]  In  that  case  the  plaintiff  complained  of  the 
disturbance  of  his  "decoy"  by  the  defendant  having  dis- 
charged guns  near  to  it  and  so  driven  away  the  wild  fowl,  with 
the  intention  and  effect  of  the  consequent  injury  to  his  trade. 
Upon  the  trial  a  verdict  passed  for  the  plamtiff,  but  in  arrest 
of  judgment  it  was  alleged  that  the  declaration  did  not  dis- 
close any  cause  of  action.  Holt,  C.  J.,  however,  held  that  the 
action,  although  new  in  instance,  was  not  new  in  reason  or 
principle,  and  well  lay,  for  he  said  that  the  use  of  a  "decoy" 
was  a  lawful  trade,  and  that  he  who  hinders  another  in  his 
trade  or  livelihood  is  liable  to  an  action  if  the  injury  is  caused 
by  "a  violent  or  malicious  act;"  suppose  "for  instance,"  he 
said,  "the  defendant  had  shot  in  his  own  ground,  if  he  had 
occasion  to  shoot  it  would  have  been  one  thing,  but  to  shoot 
on  purpose  to  damage  the  plaintiff  is  another  thing  and  a 
wrong."     But,  he  added,  if  the  defendant,  "using  the  same 


THE  COMMON  LAW  329 

employment  as  the  plaintiff,"  had  set  up  another  decoy  so 
near  as  to  spoil  the  plaintiff's  custom,  no  action  would  lie, 
because  the  defendant  had  "as  much  liberty  to  make  and  use 
a  decoy"  as  the  plaintiff.  In  support  of  this  view  he  referred 
to  earlier  authorities.  In  one  of  them  it  had  been  held  that 
for  the  setting  up  of  a  new  school  to  the  damage  of  an  ancient 
one  by  alluring  the  scholars  no  action  would  lie,  although  it 
would  have  been  otherwise  if  the  scholars  had  been  driven 
away  by  violence  or  threats. 

It  follows  therefore  from  this  authority,  and  is  undoubted 
law,  not  only  that  it  is  not  every  act  causing  damage  to  an- 
other in  his  trade,  nor  even  every  intentional  act  of  such 
damage,  which  is  actionable,  but  also  that  acts  done  by  a 
trader  in  the  lawful  way  of  his  business,  although  by  the  neces- 
sary results  of  effective  competition  interfering  injuriously 
with  the  trade  of  another,  are  not  the  subject  of  any  action. 

Of  course  it  is  otherwise,  as  pointed  out  by  Lord  Holt,  if 
the  acts  complained  of,  although  done  in  the  way  and  under 
the  guise  of  competition  or  other  lawful  right,  are  in  them- 
selves violent  or  purely  malicious,  or  have  for  their  ultimate 
object  injury  to  another  from  ill-will  to  him,  and  not  the 
pursuit  of  lawful  rights.  No  doubt,  also,  there  have  been 
cases,  in  which  agreements  to  do  acts  injurious  to  others  have 
been  held  to  be  indictable  as  amounting  to  conspiracy,  the 
ultimate  object  or  the  means  being  unlawful,  although  if  done 
by  an  individual  no  such  consequence  would  have  followed, 
but  I  think  that  in  all  such  cases  it  will  be  found  that  there 
existed  either  an  ultimate  object  or  malice,  or  wrong,  or 
wrongful  means  of  execution  involving  elements  of  injury  to 
the  public,  or,  at-  least,  negativing  the  pursuit  of  a  lawful 
object. 

Now,  applying  these  principles  to  the  case  before  your 
Lordships,  it  appears  upon  the  evidence  that  the  appellants 
and  respondents  are  shipowners,  and  have  for  many  years 
been  engaged,  sometimes  in  alliance,  at  other  times  in  com- 
petition, in  the  carrying  trade  of  the  eastern  seas  to  and  from 
Europe  and  elsewhere.  A  very  important  portion  of  this 
trade  consists  of  a  large  amount  of  freight  to  be  earned  at 
the  ports  of  Hankow  and  Shanghai  during  the  season  by  carry- 
ing to  Europe  the  teas  brought  there  for  shipment,  and  it  was 


330    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  the  respondents'  action  in  that  business  during  the  season 
of  1885  that  the  appellants  complain.  They  do  not  allege 
that  the  respondents  have  been  guilty  of  any  act  of  fraud  or 
violence,  or  of  any  physical  obstruction  to  the  appellants' 
business,  or  have  acted  from  any  personal  malice  or  ill-will, 
but  they  say  that  the  respondents  acted  with  the  calculated 
intention  and  purpose  of  driving  the  appellants  out  of  the 
Hankow  season  carrying  trade  by  a  course  of  conduct  which, 
although  not  amounting  to  violence,  was  equally  effective,  and 
so  being  in  fact  productive  of  injury  to  them  was  wrongful 
and  presumably  malicious. 

It  appeared  upon  the  evidence  that  both'  parties  have  been 
for  some  years  trading  in  competition  at  Hankow  for  tea 
freights,  which  amounted  to  a  very  considerable  sum,  and  the 
earning  of  which  was  spread  over  a  short  annual  season.  The 
trade  was  carried  on  by  a  large  number  of  independent  ship- 
owners, and  the  tonnage  which  was  employed  may  be  roughly 
divided  into  two  classes:  First,  tonnage  engaged  in  regular 
lines  to  and  from  ports  in  the  China  and  Japan  seas  all  the 
year  through,  loading  both  outwards  and  inwards;  and  sec- 
ondly, tonnage  loading  generally  outwards  to  ports  in  Aus- 
tralia or  elsewhere,  and  only  seeking  freights  and  taking  up 
"homeward"  berths  at  Hankow  during  the  short  period  when 
freights  are  abundant  there  and  scarce  elsewhere.  The  sev- 
eral respondents  and  the  "Messageries  Maritimes"  of  France 
represent  substantially  the  first  class  of  shipowners.  The 
appellants  and  other  shipowners,  who  are  no  parties  to  this 
record,  but  some  of  whom  were  in  alliance  with  the  appellants, 
in  the  same  interest,  forming  a  very  influential  class  of  traders, 
may  be  taken  to  represent  the  second. 

The  two  ports  of  Hankow  and  Shanghai  are  the  centres  of 
these  competing  interests,  and  it  is  hardly  necessary  to  add 
that  the  competition  was  very  severe,  and  the  accumulation  of 
tonnage  for  "homeward"  freights  produced  by  the  circula- 
tion of  an  excessive  number  of  ships  rendered  rates  so  un- 
remunerative  that  in  each  of  the  years  1879,  1883,  and  1885,  a 
combination  of  shipowners,  known  as  a  "conference,"  was 
formed,  consisting  in  the  main  of  the  first  class  of  owners, 
with  the  object  of  limiting  the  amount  of  tonnage  to  be  sent 


THE  COMMON  LAW  331 

up  the  river,  and  thus  securing  enhancement  and  regularity 
of  rates. 

That  the  parties  to  these  agreements  did  not  suppose  that 
they  were  doing  anything  violent  or  malicious,  or  were  parties 
to  a  conspiracy,  rendering  themselves  liable  to  action  or  in- 
dictment, is  clear  from  the  fact  that  in  1879  Messrs.  Gellatly 
&  Co.,  who  then  owned  the  ships  of  which  the  appellants  are 
now  the  owners,  and  in  1884  the  appellants  (whose  managers 
Messrs.  Gellatly  were  and  are)  were  parties  to  them,  and  in 
1885  desired  to  become  so,  and  only  brought  their  present 
action  because  the  other  parties  to  the  conference  of  that 
year  refused  to  extend  its  provisions  to  them  and  others  in  the 
same  commercial  position. 

The  grounds  upon  which  this  refusal  was  based  by  the 
respondents  were  purely  of  a  commercial  and  in  no  way  of  a 
personal  character.  They  said  that  in  forming  what  they 
considered  as  the  regular  China  and  Japan  trade  out  and  home 
they  supplied  the  trade  with  tonnage  in  season  and  out  of 
season,  and  that  it  was  hard  upon  them  that  at  times  when 
cargo  necessary  for  their  requirements,  in  order  to  fill  the 
space  required  for  outward  shipments,  and  to  make  their 
adventure  remunerative,  was  to  be  obtained,  that  cargo  should 
be  absorbed  by  vessels  that  only  entered  the  trade  when  trade 
homewards  was  slack  elsewhere. 

It  is  absolutely  unnecessary  to  consider  whether  these 
grounds  were  morally  or  commercially  justifiable.  They  were 
not  unlawful,  and  they  were  of  a  nature  legitimately,  if  not 
necessarily,  to  be  taken  into  account  in  carrying  on  the  re- 
spondents' business  with  profit.  Indeed,  the  question  between 
the  parties  at  that  time  was  not  whether  such  combination 
should  exist  or  not,  but  where  the  line  should  be  drawn.  It 
was  in  this  state  of  things  that  the  season  of  1885  opened. 

Under  the  conference  agreement  of  1884  it  had  been  agreed 
between  the  conference  owners  and  the  appellants  that  the 
latter  should  load  homewards  from  Hankow  for  that  season 
two  of  their  Australian  outward-going  ships  upon  conference 
terms  and  rates;  and  when  in  the  latter  part  of  1884  negotia- 
tions were  set  on  foot  for  the  establishment  of  a  conference 
in  1885  the  appellants  were  desirous  of  at  least  retaining  the 
same  position  in  future.     They  therefore  requested  Mr.  Holt, 


332    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

one  of  the  respondents,  an  influential  member  of  the  confer- 
ence and  personal  friend  of  Mr.  Gellatly,  to  bring  the  matter 
before  them.  In  the  meanwhile  the  effect  of  unrestricted  com- 
petition had  been  such  as  to  produce  what  was  termed  "a 
collapse  of  freights,"  with  the  result  that  negotiations  for  a 
new  conference  ended  in  an  agreement  to  that  effect,  bearing 
date  the  7th  of  April,  the  terms  of  which  were  in  most,  if  not 
in  all  important  respects,  similar  to  the  agreement  of  1884. 

The  first  object  of  the  parties  to  this  agreement  was  to  limit 
as  between  themselves  the  number  of  ships,  and  it  therefore 
provided  that  if  no  other  ships  than  those  of  the  conference 
owners  went,  no  more  than  six  conference  ships  should  go  up 
the  river  to  Hankow ;  but  then  in  order  to  meet  the  threatened 
competition  of  the  appellants  and  others  it  was  provided  that 
if  ^'outsiders"  started,  additional  steamers  should  meet  them, 
such  conference  steamers  to  be  limited  in  number  "as  much 
as  was  consistent  with  effective  opposition,"  Principles  were 
also  laid  down  for  rates  of  freight  and  distribution  of  cargo 
and  freights  among  conference  owners,  and  in  order  to  induce 
shippers  to  ship  with  them  exclusively  it  was  provided  that 
returns  should  be  made  upon  the  same  terms  as  previously 
arranged  by  agreement  of  1884  (to  which  the  appellants  have 
been  parties)  to  all  exporters  who  should  confine  their  ship- 
ments to  conference  ships. 

Whilst  the  negotiations  for  this  agreement  were  pending, 
Mr.  Gellatly,  a  large  shareholder  in  the  appellant  company, 
in  company  with  Mr.  Thompson,  a  shipowner  with  large  tonnage 
at  command,  who  was  also  desirous  of  becoming  a  member 
of  the  conference,  had  both  correspondence  and  interviews 
with  several  of  the  conference  owners,  in  which  they  claimed 
to  be  admitted  to  the  terms  of  it,  but  the  latter  persistently 
objected  upon  the  ground  that  I  have  before  stated,  and  in 
the  result  Mr.  Gellatly  and  Mr.  Thompson  declared  that 
their  vessels  should  certainly  go  up  to  Hankow  the  ensuing 
season,  as,  no  matter  what  the  rates  were,  they  thought  (as 
indeed  appears  to  have  been  the  result)  that  the  loss  to  the 
conference  would  be  greater  than  to  them. 

No  agreement  could  therefore  be  come  to  between  the  two 
parties,  and  in  the  result  the  appellants  and  Mr.  Thompson 
placed  ships  of  very  considerable  tonnage,  which  had  made 


THE  COMMON  LAW  333 

their  outward  voyage  to  Australian  ports,  upon  the  Hankow 
berth,  and  the  respondents  sent  up  the  additional  ships  pro- 
vided for  by  the  conference  agreement,  not  only  to  compete 
with  the  appellants'  and  Mr.  Thompson's  ships,  but  also  to 
deter  others  from  following. 

On  the  11th  of  May  the  respondents  also  sent  out  a  circular 
to  shippers,  referring  to  a  similar  circular  issued  under  the 
conference  agreement  of  1884,  by  which  they  reminded  those 
to  whom  it  was  sent  that  shipments  for  London  by  the  SS. 
Pathan  and  Afghan  (two  of  the  appellants'  ships)  and  the 
Aberdeen  (Mr.  Thompson's),  or  by  other  non-conference 
steamers,  at  any  of  the  ports  in  China  or  at  Hong  Kong,  would 
exclude  those  making  such  shipments  from  participation  in 
the  returns  to  shippers. 

The  competition  thus  created  was  persisted  in  during  the 
whole  first  tea  season,  each  party  procuring,  or  endeavoring 
to  procure,  freights,  and  circulating  their  ships  at  reduced 
rates,  with  the  result  that  the  three  opposing  ships  of  the 
appellants  and  Mr.  Thompson,  the  Pathan,  the  Afghan,  and 
the  Aberdeen,  loaded  full  cargoes  home  at  very  low  rates,  and 
many  of  the  conference  ships  had  to  go  away  empty. 

It  was  under  these  circumstances  that  the  appellants  brought 
the  present  action,  in  which  they  in  substance  complain,  first, 
of  the  return  of  5  per  cent,  to  the  shippers  who  have  not  shipped 
with  the  appellants,  and  of  the  circular  to  that  effect;  secondly, 
of  the  placing  upon  the  berths  of  extra  ships  in  order  to  meet 
the  appellants'  and  other  vessels;  and  thirdly,  the  reduction 
of  freights  to  an  unremunerative  extent  with  the  object  of 
securing  cargo.  I  fail,  however,  to  see  that  any  of  those 
things  are  sufficient  to  support  this  action.  Everything  that 
was  done  by  the  respondents  was  done  in  the  exercise  of  their 
right  to  carry  on  their  own  trade,  and  was  bona  fide  so  done. 
There  was  not  only  no  malice  or  indirect  object  in  fact,  but  the 
existence  of  the  right  to  exercise  a  lawful  employment,  in  the 
pursuance  of  which  the  respondents  acted,  negatives  the  pre- 
sumption of  malice  which  arises  when  the  proposed  infliction 
of  loss  and  injury  upon  another  cannot  be  attributed  to  any 
legitimate  cause,  and  is  therefore  presumably  due  to  nothing 
but  its  obvious  object  of  harm.  All  the  acts  complained  of 
were  in  themselves  lawful,  and  if  they  caused  loss  to  the  ap- 


334    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

pellants,  that  was  one  of  the  necessary  results  of  competition. 

It  remains  to  consider  the  further  contention  of  the  appel- 
lants that  these  acts  of  the  respondents,  even  if  lawful  in  them- 
selves if  done  by  an  individual,  are  illegal  and  give  rise  to  an 
action  as  having  been  done  in  the  execution  of  the  conference 
agreement,  which  is  said  to  amount  to  a  conspiracy,  as  being 
in  restraint  of  trade,  and  so  against  public  policy,  and  illegal ; 
but  this  contention,  I  think,  also  fails.  I  cannot  say  upon  the 
evidence  that  the  agreement  in  question  was  calculated  to 
have  or  had  any  such  result,  nor,  even  if  it  had,  has  any 
authority  (except  one,  no  doubt  entitled  to  great  weight,  but 
which  has  not  met  with  general  approval)  been  cited  to  shew 
that  such  an  agreement  even  if  void  is  illegal,  nor  any  that, 
even  if  it  be  so,  any  action  lies  by  an  individual. 

For  these,  and  the  other  reasons  given  by  the  learned  Lords 
Justices  BowEN  and  Fry,  and  which  I  need  not  recapitulate, 
I  think  that  the  appeal  fails,  and  ought  to  be  dismissed. 

LORD  HANNEN:  My  Lords,  it  is  not  necessary  that  I 
should  recapitulate  the  facts  of  this  case ;  they  have  been  fully 
stated  in  the  opinions  which  have  been  already  delivered. 
The  charge  against  the  defendants  is  that  they  conspired  to- 
gether to  prevent  the  plaintiffs  from  obtaining  cargoes  for 
their  ships  by  bribing,  coercing,  and  inducing  shippers  to  for- 
bear from  shipping  cargoes  by  the  plaintiffs'  steamers;  and  it 
is  further  complained  that  the  defendants,  with  intent  to  injure 
the  plaintiffs,  agreed  to  refuse,  and  refused  to  accept  cargoes, 
except  upon  the  terms  that  the  shippers  should  not  ship  any 
cargoes  by  the  plaintiffs'  steamers. 

The  means  by  which  these  alleged  objects  were  sought  to  be 
attained  were:  (1)  Offering  to  shippers  and  their  agents  a 
rebate  of  5  per  cent,  on  the  agreed  freights,  to  be  made  to 
those  who,  during  a  fixed  period,  shipped  only  by  the  defend- 
ants' steamers.  (2)  Sending  steamers  to  Hankow  to  compete 
with  the  steamers  of  persons  not  members  of  the  defendants' 
conference  or  combination,  so  as  to  drive  them  from  the  trade 
of  that  place.  (3)  Removing  from  the  agency  of  defendants' 
steamers  those  persons  who  acted  in  the  interest  of  non-con^ 
ference  steamers. 

It  was  contended  that  the  agreement  between  the  defend- 


THE  COMMON  LAW  335 

ants  to  act  in  combination  which  was  proved  to  exist,  was 
illegal  as  being  in  restraint  of  trade.  I  think  that  it  was  so, 
in  the  sense  that  it  was  void,  and  could  not  have  been  enforced 
against  any  of  the  defendants  who  might  have  violated  it: 
Hilton  V.  Eckersley  [6  E.  &  B.  47].  But  it  does  not  follow  that 
the  entering  into  such  an  agreement  would,  as  contended,  sub- 
ject the  persons  doing  so  to  an  indictment  for  conspiracy,  and 
I  think  that  the  opinion  to  that  effect  expressed  by  Crompton, 
J.,  in  Hilton  v.  Eckersley  [6  E.  &  B.  47]  is  erroneous. 

The  question,  however,  raised  for  our  consideration  in  this 
case  is  whether  a  person  who  has  suffered  loss  in  his  business 
by  the  joint  action  of  those  who  have  entered  into  such  an 
agreement,  can  recover  damages  from  them  for  the  injury  so 
sustained.  In  considering  this  question  it  is  necessary  to  de- 
termine upon  the  evidence  what  was  the  object  of  the  agree- 
ment between  the  defendants  and  what  were  the  means  by 
which  they  sought  to  attain  that  object.  It  appears  to  me 
that  their  object  was  to  secure  to  themselves  the  benefit  of 
the  carrying  trade  from  certain  ports.  It  cannot,  I  think,  be 
reasonably  suggested  that  this  is  unlawful  in  any  sense  of  the 
word.  The  object  of  every  trader  is  to  procure  for  himself 
as  large  a  share  of  the  trade  he  is  engaged  in  as  he  can.  If 
then  the  object  of  the  defendants  was  legitimate,  were  the 
means  adopted  by  them  open  to  objection?  I  cannot  see  that 
they  were.  They  sought  to  induce  shippers  to  employ  them 
rather  than  the  plaintiffs  by  offering  to  such  shippers  as 
should  during  a  fixed  period  deal  exclusively  with  them  the 
advantage  of  a  rebate  upon  the  freights  they  had  paid.  This 
is,  in  effect,  nothing  more  than  the  ordinary  form  of  competi- 
tion between  traders  by  offering  goods  or  services  at  a  cheaper 
rate  than  their  rivals. 

With  regard  to  the  sending  of  ships  to  Hankow  to  compete 
with  the  plaintiffs'  ships,  that  appears  to  have  been  done  in 
order  that  the  defendants'  customers  might  have  the  oppor- 
tunity of  sending  their  goods  without  forfeiting  their  right  to 
a  rebate.  No  obstruction  was  offered  by  these  ships  to  the 
ships  of  non-conference  owners,  and  by  their  presence  at  Han- 
kow shippers  were  left  simply  to  determine  whether  it  was  to 
their  pecuniary  interest  to  ship  by  the  defendants'  vessels  or 
by  others.    The  removing  from  the  agency  of  the  defendants' 


336    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

vessels  those  persons  who  acted  in  the  interest  of  non-confer- 
ence steamers,  appears  to  me  a  legitimate  mode  of  securing 
agents  whose  exertions  would  be  exclusively  devoted  to  the 
furtherance  of  the  defendants'  trade. 

I  arrive  at  the  conclusion,  therefore,  that  the  objects  sought 
and  the  means  used  by  the  defendants  did  not  exceed  the  limits 
of  allowable  trade  competition,  and  I  know  of  no  restriction 
imposed  by  law  on  competition  by  one  trader  with  another, 
with  the  sole  object  of  benefiting  himself. 

I  consider  that  a  different  case  would  have  arisen  if  the  evi- 
dence had  shewn  that  the  object  of  the  defendants  was  a 
malicious  one,  namely,  to  injure  the  plaintiffs  whether  they, 
the  defendants,  should  be  benefited  or  not.  This  is  a  question 
on  which  it  is  unnecessary  to  express  an  opinion,  as  it  appears 
to  be  clear  that  the  defendants  had  no  malicious  or  sinister 
intent  as  against  the  plaintiffs,  and  that  the  sole  motive  of 
their  conduct  was  to  secure  certain  advantages  for  themselves. 
It  only  remains  for  me  to  refer  to  the  argument  that  an  act 
which  might  be  lawful  for  one  to  do,  becomes  criminal,  or  the 
subject  of  civil  action  by  any  one  injured  by  it,  if  done  by 
several  combining  together.  On  this  point  I  think  the  law  is 
accurately  stated  by  Sir  William  Erie  in  his  treatise  on  the 
law  relating  to  Trades  Unions.  The  principle  he  lays  down 
is  equally  applicable  to  combinations  other  than  those  of 
Trades  Unions.  He  says  (page  23):  "As  to  combination, 
each  person  has  a  right  to  choose  whether  he  will  labour  or 
not,  and  also  to  choose  the  terms  on  which  he  will  consent  to 
labour,  if  labour  be  his  choice.  The  power  of  choice  in  respect 
of  labour  and  terms  which  one  person  may  exercise  and  de- 
clare singly,  many,  after  consultation,  may  exercise  jointly, 
and  they  may  make  a  simultaneous  declaration  of  their  choice, 
and  may  lawfully  act  thereon  for  the  immediate  purpose  of 
obtaining  the  required  terms,  but  they  cannot  create  any 
mutual  obligation  having  the  legal  effect  of  binding  each  other 
not  to  work  or  not  to  employ  unless  upon  terms  allowed  by 
the  combination." 

In  considering  the  question,  however,  of  what  was  the  mo- 
tive of  the  combination,  whether  it  was  for  the  purpose  of 
injuring  others,  or  merely  in  order  to  benefit  those  combining, 
the  fact  of  several  agreeing  to  a  common  course  of  action  may 


THE  COM^ION  LAW  337 

be  important.  There  are  some  forms  of  injury  which  can  only 
be  effected  by  the  combination  of  many.  Thus,  if  several  per- 
sons agree  not  to  deal  at  all  with  a  particular  individual,  as 
this  could  not,  under  ordinary  circumstances,  benefit  the  per- 
sons so  agreeing,  it  might  well  lead  to  the  conclusion  that  their 
real  object  was  to  injure  the  individual.  But  it  appears  to 
me  that,  in  the  present  case,  there  is  nothing  indicating  an 
intention  to  injure  the  plaintiffs,  except  in  so  far  as  such  injury 
would  be  the  result  of  the  defendants  obtaining  for  them- 
selves the  benefits  of  the  carrying  trade,  by  giving  better 
terms  to  customers,  than  their  rivals,  the  plaintiffs,  were  will- 
ing to  offer. 

For  these  reasons  I  think  that  the  judgment  of  the  Court  of 
Appeal  should  be  affirmed. 

Order  of  Lord  Coleridge,  C.  J.,  and  order  of  the  Court  of 
Appeal  affirmed,  and  appeal  dismissed  with  costs. 


ALLEN  V.  FLOOD 

(House  of  Lords,  1898.    L.  R.  [1898]  App.  Cas.  1.)  37 

The  facts  material  to  this  appeal  (omitting  matters  not  now 
in  question)  were  as  follows:  In  April,  1894,  about  forty 
boiler-makers,  or  "iron-men,"  were  employed  by  the  Glengall 
Iron  Company  in  repairing  a  ship  at  the  company's  Regent 
Dock  in  Millwall.  They  were  members  of  the  boiler-makers' 
society,  a  trade  union,  which  objected  to  the  employment  of 
shipwrights  on  ironwork.  On  April  12  the  respondents  Flood 
and  Taylor,  who  were  shipwrights,  were  engaged  by  the  com- 
pany in  repairing  the  woodwork  of  the  same  ship,  but  were 
not  doing  ironwork.  The  boiler-makers,  on  discovering  that 
the  respondents  had  shortly  before  been  employed  by  another 
firm  (Mills  &  Knight)  on  the  Thames  in  doing  ironwork  on  a 
ship,  became  much  excited  and  began  to  talk  of  leaving  their 

37 — This  case  fills  pages  1  to  181  views  reprinted  from  the  article  of 

of    the   volume    of    reports.      Argu-  L.   C.  Krauthoff  in  the  Reports  of 

ments  of  counsel  have  been  omitted.  the  American  Ba-r  Association,  Vol. 

The    positions    of   the   judges   have  21,  359-365. 
been  stated  and  a  summary  of  their 

Kales  B.  of  T.  Vol.  1—22 


338    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

employment.  One  of  them,  Elliott,  telegraphed  for  the  appel- 
lant Allen,  the  London  delegate  of  the  boiler-makers'  society. 
Allen  came  up  on  the  13th,  and  being  told  by  Elliott  that  the 
iron-men,  or  some  of  them,  would  leave  at  dinner-time,  replied 
that  if  they  took  the  law  into  their  own  hands  he  would  use 
his  influence  with  the  council  of  the  society  that  they  should 
be  deprived  of  all  benefit  from  the  society  and  be  fined,  and 
that  they  must  wait  and  see  how  things  settled.  Allen  then 
had  an  interview  with  Halkett,  the  Glengall  Company's  man- 
ager, and  Edmonds  the  foreman,  and  the  result  was  that  the 
respondents  were  discharged  at  the  end  of  the  day  by  Halkett. 
(An  action  was  then  brought  by  the  respondents  against 
Allen  for  maliciously  and  wrongfully  and  with  intent  to  in- 
jure the  plaintiffs  procuring  and  inducing  the  Glengall  Com- 
pany to  break  their  contract  with  the  plaintiffs  and  not  to 
enter  into  new  contracts  with  them,  and  also  maliciously,  etc., 
and  also  unlawfully  and  maliciously  conspiring  with  others 
to  do  the  above  acts. 

At  the  trial  before  Kennedy,  J.,  and  a  common  jury,  Hal- 
kett and  Edmonds  were  called  for  the  plaintiffs,  and  gave 
their  account  of  the  interview  with  Allen.  In  substance  it 
was  this :  ^s    Allen  told  them  that  he  had  been  sent  for  because 

38 Part  of  the  evidence  is  given  and  that  unless  these  two  men  were 

verbatim  in  the  judgment  of  Lord  discharged  from  our  employment 
Halsbury,  L.  C,  as  follows,  pp.  69-  that  day  all  the  ironworkers  be- 
71:  "And  now  I  will  quote,  as  longing  to  his  society  would  leave 
nearly  as  I  can,  the  language  which  off  work  that  day;  and  they  gave 
is  alleged  to  have  been  used  by  as  the  only  reason  that  these  men 
Allen  in  his  con^munications.  I  were  guilty  of  doing  ironwork  in 
quote  first  what  was  stated  by  Mr.  Mills  &  Knight's  yard.  ...  The 
Halkett,  who  was  the  managing  substance  of  what  he  said  was  that 
director  of  the  Glengall  Iron  Com-  they  were  really  trying  to  put  an 
pany.  Allen  said,  *He  had  received  end  to  this  practice  of  doing  iron- 
word  from  some  of  the  boiler-  work  by  the  shipwrights— to  stop 
makers  that  were  working  in  our  shipwrights  being  engaged  in  iron- 
yard  that  they  wanted  to  see  him,  work.  That  it  was  not  from  any 
and  he  came  round  and  had  an  inter-  ill-feeling  against  ourselves  nor 
view  with  these  men,  and  they  told  against  any  men  in  particular — 
him  that  we  had  two  shipwrights  Flood  and  Taylor;  but  they — that 
engaged  in  our  employment  who  is,  the  boiler-makers — had  made  up 
were  known  to  have  done  ironwork  their  minds — or  we  have  made  up 
before    in    Mills    &    Knight's   yard,  our     minds — that     wherever     it     is 


THE  C0M:\I0N  law 


339 


Flood  and  Taylor  were  known  to  have  done  ironwork  in  Mills 
&  Knight's  yard,  and  that  unless  Flood  and  Taylor  were  dis- 
charged all  the  members  of  the  boiler-makers'  society  would 
be  "called  out"  or  "knock  ofiP"  work  that  day:  they  could 
not  be  sure  which  expression  was  used;  that  Halkett  had  no 
option ;  that  the  iron-men  were  doing  their  best  to  put  an  end 
to  the  practice  of  shipwrights  doing  ironwork,  and  wherever 
these  men  were  employed,  or  other  shipwrights  who  had  done 
ironwork,  the  boiler-makers  would  cease  work — in  every  yard 
on  the  Thames.  Halkett  said  that  if  the  boiler-makers  (about 
100  in  all  were  employed)  had  been  called  out  it  would  have 
stopped  the  company's  business,  and  that  in  fear  of  the  threat 
being  carried  out  he  told  Edmonds  to  discharge  Flood  and 
Taylor  that  day,  and  that  if  he  knew  of  any  shipwrights  hav- 
ing worked  on  ironwork  elsewhere,  when  he  was  engaging  men, 
for  the  sake  of  peace  and  quietness  for  themselves  he  was  not 
to  employ  them.  Allen  was  called  for  the  defence.  His  ac- 
count of  the  interview  is  discussed  in  the  judgment  of  Lord 
Halsbury,  L.  C. 


known  that  any  shipwrights  have 
been  engaged  doing  ironwork,  their 
workmen — that  is,  the  boiler-makers 
— would  cease  work  on  the  same  ship 
on  the  same  employment. ' 

' '  Then  a  question  was  asked,  '  Did 
he  say  anything  in  regard  to  Flood 
and  Taylor  in  respect  of  other  yards 
besides  yours?'  And  the  answer 
was,  '  Not  in  a  particular  sense ;  in 
a  general  sense  that  these  men  would 
be  followed — that  these  men  were 
known — it  was  so  difficult  to  get 
them  known;  that  these  men  were 
known,  and  wherever  these  men 
were  employed  the  same  action 
would  be  taken  there  as  had  been 
taken  in  our  place. '  He  also  said, 
'you  have  no  option.  If  you  con- 
tinue to  engage  these  men  our  men 
will  leave.  ...  It  was  in  con- 
sequence of  that  that  the  men  were 
discharged.  It  was  the  fear  of  the 
threat    being    carried    out — of    the 


men  leaving — the  boiler-makers.  If 
the  boiler-makers  had  left  or  had 
been  called  out  it  would  seriously 
have  impeded  our  business.  .  .  . 
The  threat  to  withdraw  these  iron- 
workers extended  to  every  workman 
we  had  in  our  employment  at  what- 
ever place.'  He  goes  on  to  say 
(after  an  embarrassing  interrup- 
tion) that  'the  threat  was  to  with- 
draw the  ironworkers  in  the  employ- 
ment of  the  Glengall  Iron  Company 
from  every  ship  or  every  job  upon 
which  the  Glengall  Iron  Company 
were  engaged  on  which  the  men  of 
their  union  were  employed. ' 

' '  Mr.  Edmonds,  the  foreman  of 
the  Glengall  Iron  Company,  deposed 
as  follows :  '  Mr.  Halkett  sent  for 
me  and  when  I  got  in  the  room  he 
said,  ' '  Mr.  Allen  has  come  here  and 
says  that  if  those  two  men" — that 
is,  Flood  and  Taylor — ' '  are  not 
discharged  all  of  the  ironmen  will 


340    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

KENNEDY,  J.,  ruled  that  there  was  no  evidence  of  con- 
spiracy, or  of  intimidation  or  coercion,  or  of  breach  of  con- 
tract, Flood  and  Taylor  having  been  engaged  on  the  terms  that 
they  might  be  discharged  at  any  time.  In  the  ordinary  course 
their  employment  would  have  continued  till  the  repairs  were 
finished  or  the  work  slackened. 

In  reply  to  questions  put  by  Kennedy,  J.,  the  jury  found 
that  Allen  maliciously  induced  the  Glengall  Company  (1)  to 
discharge  Flood  and  Taylor  from  their  employment;  (2)  not 
to  engage  them ;  that  each  plaintiff  had  suffered  £20  damages ; 
and  that  the  settlement  of  the  dispute  was  a  matter  within 
Allen's  discretion.  After  consideration  Kennedy,  J.,  entered 
judgment  for  the  plaintiffs  for  £40.  This  decision  was  affirmed 
by  the  Court  of  Appeal  (Lord  Esher,  M.  R.,  Lopes  and 
RiGBY,  L.  J  J.). 2^  Against  these  decisions  Allen  brought  the 
present  appeal.  It  was  argued  first  before  Lord  Halsbury, 
L.  C,  and  Lords  Watson,  Herschell,  Macnaghten,  Morris, 
Shand,  and  Davey,  on  December  10,  12,  16,  17,  1895,  and  again 
(the  following  judges  having  been  summoned  to  attend — 
Hawkins,  Mathew,  Cave,  North,  Wills,  Grantham,  Lawrance 
and  Wright,  JJ.)— on  March  25,  26,  29,  30,  April  1,  2,  1897, 
before  the  same  noble  and  learned  Lords,  with  the  addition 
of  Lords  Ashbourne,  and  James  of  Hereford. 

knock  off  work  or  be  called  out."  is    not   material   to   this   case.     He 

I   will   not  be   sure   what  term   he  says  that  was  the  case,  and  if  these 

used.     I  asked  Mr.  Allen  the  reason  men  were  not  discharged,  their  men 

why.      He    said    because    those    two  would  be  called  out  or  ' '  knock  off ' ' 

men   had   been   working   at   Messrs.  — I  will  not  be  sure  what  term  he 

]\mis   &  Knight's  on  ironworks.     I  used.     Me  and  Mr.  Allen  had  a  few 

told    him    I    thought    it    was    very  words,  but  that  is  immaterial  to  this, 

arbitrary    on    his    part    to    do    any-  I  think  that  is  all  that  is  material 

thing  like  that.   I  told  him  I  thought  to  this  case. ' 

it  was  not  right  that  Messrs.  Mills  Q.— "  'Was   anything  said   about 

&    Knight's   sins   should   be   visited  other  yards?' 

upon  us.'  A. — "  'Yes.    When  I  spoke  about 

Q. — "  'Did     anything     else     take  it  not  being  right  to  visit  MiUs  & 

place?'  Kjiight's    sins    on    us,    he    said    the 

A. — "  'For    the    reason    that    we  men  would  be  called  out  from  any 

w6re  not  employing  the  shipwrights  yard  they  went  to — they  would  not 

on    ironwork,    and   never   had   done  be    allowed    to    work    anywhere    in 

so — not  at  the  Glengall.     There  was  London  river.'  " 

a  lot  of  other  conversation,  but  that  39— [1895]  2  Q.  B.  21. 


THE  COMMON  LAW  341 

At  the  close  of  the  arguments  the  following  question  was 
propounded  to  the  judges:  Assuming  the  evidence  given  by 
the  plaintiffs'  witnesses  to  be  correct,  was  there  any  evidence 
of  a  cause  of  action  fit  to  be  left  to  the  jury? 

The  following  justices  summoned  answered  the  question  in 
the  affirmative:  Hawkins,  J.,  Cave,  J.,  North,  J.,  Wills,  J., 
Grantham,  J.,  Lawrance,  J. 

The  following  justices  summoned  answered  the  question  in 
the  negative :  Mathew,  J.,  Wright,  J. 

In  the  House  of  Lords  the  decision  of  the  Court  of  Appeal 
[1895]  2  Q.  B.  21,  was  reversed.  Lord  Halsbury,  L.  C,  and 
Lords  Ashbourne  and  Morris  dissenting. 

In  favor  of  reversal  were  Lords  Watson,  Herschell,  Mac- 
naghten,  Shand,  Davey  and  James  of  Hereford. 

The  following  is  Mr.  L.  C.  Krauthoff's  summary  of  the 
views  of  the  judges: 

The  course  which  the  plaintiffs'  case  took,  in  respect  of  the 
pleadings,  the  evidence,  and  the  propositions  advanced  at  the 
several  arguments,  discloses  the  difficulties  with  which  their 
counsel  found  themselves  confronted: 

1.  The  suit  was  brought  on  the  theory  of  a  conspiracy,  in 
the  evident  hope  that  thereby  some  added  weight  would  be 
given  to  the  claim  of  injuria  asserted  on  behalf  of  the  plaintiffs. 

2.  It  was  alleged  that  existing  contracts  had  been  actually 
induced  to  be  broken,  with  manifest  reference  to  the  rule  of 
Lumley  v.  Gye'**'  and  Bowen  v.  Hall.^^ 

3.  It  was  then  charged  the  Glengall  Company  had  been  in- 
duced not  to  enter  into  new  contracts  with  the  plaintiff,  an 
allegation  which  was  originally  apparently  intended  to  mean 
not  to  employ  the  plaintiffs  on  other  work  in  the  future,  but 
which  the  exigencies  of  the  case  drove  the  plaintiffs  to  con- 
strue into  an  allegation  covering  a  re-employment  of  the  plain- 
tiffs on  the  same  work,  from  day  to  day. 

4.  The  allegation  of  "malice"  and  the  claim  that  not  enter- 
ing into  a  new  contract  stood,  in  this  respect,  on  the  same  legal 
basis  as  the  breach  of  an  existing  unexpired  or  unperformed 

40—2  E.  &  B.  216.  41—6  Q.  B.  D.  333. 


342    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

contract,  were  adoptions  of  Lord  Esher's  dicta  in  Bowen  v. 
Hall  ^-  and  Temperton  v.  Russell.^^ 

5,  It  was  also  alleged  that  unlawful  means  (threats,  intimi- 
dations and  coercion)  had  been  resorted  to  by  the  defendants. 

On  the  trial  the  plaintiffs  failed  in  their  allegations  of  con- 
spiracy, of  the  breach  of  existing  contracts,  and  of  unlawful 
means,"*^  and  the  judgment  of  the  Court  of  Appeal  in  affirm- 
ance of  the  conclusions  of  Kennedy,  J.,  on  these  questions, 
was  not  taken  to  the  House  of  Lords  by  cross-appeal.  The 
Lord  Chancellor,  however,  deemed  it  necessary  to  his  reason- 
ing to  question  the  correctness  of  these  rulings.'*^ 

6.  After  Kennedy,  J.,  had  thus  ruled,  the  plaintiffs  were 
driven  to  assert  a  peculiar  right,  not  dependent  upon  Bowen 
V.  Hall,  or  Temperton  v.  Russell,  but  based  upon  the  claim 
that  one's  trade  or  occupation  and  the  reasonable  hope  or 
expectation  that  he  would  succeed  in  the  one  or  be  employed 
in  the  other,  was  a  species  of  right,  an  interference  with  which, 
at  least  when  prompted  by  malice,  constituted  an  actionable 
wrong. 

KENNEDY,  J.,  in  delivering  his  considered  judgment, 
adopted  the  newly  suggested  proposition  as  having  been  laid 
down  obiter,  by  Holt,  C.  J.,  in  Keeble  v.  Hickeringill,-*^  and 
as  having  been  recognized  in  a  number  of  subsequent  cases. 

In  the  Court  of  Appeal,  Lord  Esher,  M.  R.,  and  Lord  Lud- 
low did  not  notice  this  phase  of  the  case,  but  planted  the 
affirmance  broadly  on  the  proposition  that  to  successfully 
persuade  one  not  to  enter  into  a  contract  or  to  terminate  an 
existing  employment,  even  if  lawfully  terminable  on  the 
party's  own  motion,  or  as  the  result  of  friendly  advice,  or  of 
persuasion  in  good  faith,  was  an  actionable  wrong,  if  done 
from  an  indirect  motive,  i.  e.  with  intent  to  "injure"  the 
plaintiff  or  to  benefit  the  defendant  at  his  expense. 

A  careful  consideration  of  the  conclusions  announced  in  the 

42—6  Q.  B.  D.  333.  45— (1898)   A.  C.  80,  83,  87. 

43— (1893)   1  Q.  B.  715.  46—11  East,  574n. 

44 — "The  case  as  launched  broke 
down,"  per  Lord  Maenaghten 
(148). 


THE  COMMON  LAW 


343 


several  opinions  delivered  to  and  by  the  House  of  Lords  dis- 
closes these  to  be  the  propositions  upon  which  the  case  turned : 

a.  There  was  substantial  unanimity  that  as  a  general  rule  a 
bad  motive  alone  could  not  create  a  cause  of  action.^'^ 

b.  The  minority,  however,  contended  that  the  case  at  bar 
was  an  exception,  in  that  the  plaintiffs  had  a  right  in  the 
premises,  and  that  an  interference  with  that  right  (a)  by  one 
whose  acts  were  not  merely  in  the  exercise  of  a  right  he  had, 
but  actuated  by  malice  ^^  (using  the  word  in  a  popular  sense 
as  proving  a  purpose  to  "punish"  the  plaintiffs), ^^  or  (b)  by 
the  use  of  illegal  means,'^*'  was  actionable. 

c.  The  majority  of  those  who  favored  an  affirmance  con- 
ceded that  their  proposition  could  be  applied  only  in  case  a 
trade  or  occupation  was  thus  maliciously  obstructed."'^ 

d.  The  minority  further  contended  that  the  only  standing 
which  the  defendant's  principals,  the  iron-men,  had  as  against 
the  plaintiffs,  was  a  privilege  to  decline  to  work  with  them, 
provided  they  exercised  this  privilege  in  good  faith,^^  or  to 


47 — Cave,  J. :  "  Malice  alone  never 
constitutes  a  cause  of  action,  or  in 
other  words,  does  not  make  that  a 
wrong  which  otherwise  would  not 
be  a  wrong,"  (29).  Wills,  J.:  As 
to  "acts  which  a  man  has  a  definite 
legal  right  to  do  without  any  quali- 
fication and  which  cannot  be  action- 
able, motive  is  immaterial,  .  .  . 
no  matter  what  may  be  the  conse- 
quences to  others"  (46,  51).  Lord 
Watson:  "Malice  derives  its  essen- 
tial character  from  the  circumstance 
that  the  act  done  constitutes  a 
violation  of  the  law"  (92).  Also, 
Earl  of  Halsbury,  L.  C.  (84)  ;  Lord 
Herschell  (123-125)  ;  Lord  Macnagh- 
ten  (151-153);  Lord  Shand  (167); 
Lord  Davey  (172)  ;  Mathew,  J. 
(25);  Wright,  J.   (65). 

48— Earl  of  Halsbury,  L.  C.  (76- 
80,  83-84). 

49— Earl  of  Halsbury,  L.  C.  (85)  ; 
Lord  Ashbourne  (111,  114);  Lord 
Morris    (159);    Hawkins,    J.    (21); 


Cave,  J.  (37);  North,  J.  (39); 
Wills,  J.  (45)  ;  Grantham,  J.  (52,53). 

50— Earl  of  Halsbury,  L.  C,  said 
that  this  "was  in  truth  the  whole 
question  in  the  case"  (89),  and 
Hawkins,  J.,  that  "the  plaintiffs' 
grievance  is  for  using  wrongful 
means"   (16). 

51— Lord  Watson :  ' '  The  majority 
of  the  consulted  judges  who  approve 
the  doctrine  (of  Lord  Esher)  have 
only  dealt  with  it  as  applying  to 
cases  of  interference  with  a  man's 
trade  or  employment"  (100).  See 
Hawkins,  J.  (14,  15);  Cave,  J.  (29- 
35)  ;  Wills,  J.  (50-51)  ;  Grantham, 
J.  (55);  Lawrance,  J.  (58).  The 
same  view  was  adopted  by  the  Earl 
of  Halsbury,  L.  C.  (71,  75)  ;  Lord 
Ashbourne  (112-113);  and  Lord 
Morris    (155-158). 

52— Earl  of  Halsbury,  L.  C.  (75- 
7S,  citing,  also  several  American 
cases,  83,  86) ;  Hawkins,  J.  (19,  21, 
23,   24). 


344    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

leave  the  employment  of  the  Glengall  Company,  provided 
their  purpose  in  doing  so  was  not  thereby  to  "injure"  the 
plaintiffs,  or  to  "coerce"  their  employer.^^ 

e.  It  was  further  laid  down  that  because,  instead  of  actually 
leaving  such  employ,  the  representative  of  the  iron-men  had 
"threatened"  that  they  would  do  so,^'*  and  by  means  of 
such  "thi-eat,"  communicated  to  the  Glengall  Company,  had 
"coerced"  and  "intimidated"  the  latter  into  "discharging" 
the  plaintiffs,  the  defendant  was  liable  for  having  used  illegal 
means.^-' 

f.  And  it  was  further  contended  that  although  the  plain- 
tiffs' employment  was  lawfully  terminable  at  will  by  the 
Glengall  Company,^^  and  that  although  an  action  could  not 
be  maintained  against  one  who  merely  "procured"  a  ter- 
mination thereof,^^  yet  if  such  procurement  was  done  with 
"malice"  (in  its  popular  sense  of  a  bad  motive ),^s  the  act 
was  actionable. 

Concerning  these  propositions,  the  decision  was: 


53— Earl  of  Halsbury,  L.  C.  (82- 
85).  With  the  exception  of  Wills, 
J.  (who  differed  in  part,  51),  the 
consulted  judges  who  favored  af- 
firmance, applied  Lord  Esher's  rule 
of  indirect  motive. 

54_Hawkins,  J.   (23). 

55— Earl  of  Halsbury,  L.  C.  (74, 
80,  87);  Lord  Ashbourne  (113); 
Lord  Morris  (159)  ;  Hawkins,  J. 
(21)  ;  North,  J.  (44)  ;  Grantham,  J. 
(53,  54)  ;  Lawrance,  J.  (59,  61). 

56 — As  to  which  the  Earl  of  Hals- 
bury, L.  C.  (68)  ;  Hawkins,  J.  (13, 
14,  21),  and  North,  J.  (43), 
doubted. 

57 — This  concession  runs  through 
all  the  judgments  in  which  it  is  held, 
directly  or  by  assumption,  that  un- 
less illegal  means  be  resorted  to, 
no  action  lies. 

58— Earl  of  Halsbury,  L.  C.  (84, 
85);  Hawkins,  J.:  "I  confess  for 
my  own   part  that  I   should  prefer 


to  confine  the  term  'malice'  to  its 
ordinary  and  popular  acceptance" 
(18);  North,  J.:  "In  the  popular 
meaning  of  the  word"  (41);  Wills, 
J.:  "A  spiteful  feeling"  (45).  The 
fact  that  it  was  the  purpose  of 
Allen  and  of  the  iron-men  to 
' '  punish ' '  the  plaintiffs,  was  strong- 
ly relied  on  to  prove  what  Grant- 
ham, J.  (53),  characterized  as 
"malice  of  the  worst  kind";  Earl 
of  Halsbury,  L.  C.  (85)  ;  Lord  Ash- 
bourne (111,  114)  ;  Lord  Morris 
(159);  Hawkins,  J.  (21);  Cave,  J. 
(37);  North,  J.  (39);  Wills,  J. 
(45).  Wright,  J.,  said  (63):  "The 
only  kind  of  malice  which  can  be 
suggested  in  the  present  case  is 
malice  in  its  popular  sense,  import- 
ing a  malicious  motive,  spite,  and 
ill-will. ' '  To  the  same  effect,  Lord 
Watson  (94),  and  Lord  Herschell 
(120). 


THE  COMMON  LAW  345 

a.  It  is  a  universal  rule  of  the  common-law  that  an  act  law- 
ful in  itself  is  not  converted  by  a  malicious,  i.  e.  bad  or 
indirect,  motive  into  an  unlawful  or  tortious  act.^^ 

b.  While  the  plaintiffs  no  doubt  had  a  right  to  carry  on 
their  occupation  without  interference,  this  meant  an  unlawful 
interference ;  ^^  the  position  taken  by  the  iron-men  was  the 
exercise  of  a  right  which  they  had  to  leave  their  employment 
at  will,  and  to  select  the  persons  for  and  with  whom  and  the 
conditions  under  which  they  were  willing  to  work;*'^  this 
right  was  of  as  high  a  dignity  and  status  in  the  law  as  the 
right  asserted  on  behalf  of  the  plaintiffs;  "^2  it  was  indeed  a 
distinct  and  absolute  right,  and  was  not  destroyed  or  qualified 
because  the  exercise  of  it,  on  the  particular  occasion,  may 
have  been  morally  reprehensible  or  impelled  by  a  bad  mo- 
tive ;  <53  nor  was  its  exercise  limited  to  instances  of  commercial 
competition.^^ 

c.  The  fact  that  from  the  very  nature  of  things  such  con- 
tests usually  arise  in  respect  of  a  trade  or  occupation  did  not 
prove  the  existence  of  a  peculiar  right  in  persons  following 
the  same;  but  the  right  to  be  free  from  unlawful  disturbance 

59_Lor(i  Watson  (92  et  seq.:  an  case"     (131).       Lord    Macnaghten 

able    discussion);     Lord    Hersehell  (148);    Lord    Shand    (166);    Lord 

(123-125);   Lord  Macnaghten    (151-  Davey   (173). 

153);     Lord    Shand     (167);     Lord  62— "The   plaintiffs   had   a  right 

Davey  (172);  Lord  James  of  Here-  to    dispose    of    their   labor    as   they 

ford      (179);      Mathew,     J.      (25);  pleased,   limited   only   by   the   equal 

Wright,  J.  (65).  right  of  the  defendant"  to  do  the 

60— Lord  Watson  (102-107);  Lord  same  (Cave,  J.,  37). 

Hersehell  (121-123,  127,  138);  Lord  63— Lord  Watson:      "I  am  alto- 

Shand    (166)  ;   Lord  Davey    (173) ;  gether  unable  to  appreciate  the  loose 

Lord  James  of  Hereford   (179-180).  logic  which  confounds  internal  feel- 

61 — Lord    Watson :       "It   is    the  ings  with  outward  acts,   and  treats 

absolute  right  of  every  workman  to  the   motive   of   the  actor   as  one  of 

exercise  his  own  option  with  regard  the  means  employed  by  him"  (98); 

to  the  persons  in  whose  society  he  Lord     Hersehell     (138-139)  ;     Lord 

will    agree    or    continue    to    work"  Macnaghten  (151-153);  Lord  Shand 

(98).     Lord  Hersehell:     "The  iron-  (166);    Lord    Davey     (173);    Lord 

workers  were  no  more  bound  to  work  James  of  Hereford   (179). 

with  those  whose  presence  was  dis-  64 — Lord     Hersehell      (140-141)  ; 

agreeable  to  them  than  the  plaintiffs  Lord    Davey     (173);     Lord    Shand 

were   bound  to   refuse   to   work  be-  (164-166). 
cause  they  found  that  this  was  the 


346    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

or  interference  was  a  general  one,  and  was  possessed  by  every 
person  without  regard  to  his  avocation  in  life,  or  the  place  or 
nature  of  his  enjoyment  of  such  right.^^ 

d.  As  the  iron-men  had  a  right  to  thus  leave  their  employ- 
ment, it  was  not  a  resort  to  illegal  means,  but  indeed  their 
moral  duty,  to  notify  their  employer  of  their  intention.  Notice 
of  a  purpose  to  do  a  lawful  act  or  to  exercise  a  legal  right,  is 
not  a  "threat,"  and  is  no  more  illegal  than  the  actual  doing 
of  such  act  or  exercise  of  such  right  would  be.^"  As  the  iron- 
men  and  each  of  them  had  a  right  to  refuse  to  work  in  asso- 
ciation with  the  plaintiffs  and  to  leave  their  employment  in 
case  the  employer  decided  to  so  conduct  his  business  as  to 
bring  about  such  association,  it  was  in  no  sense  "coercion" 
to  put  him  to  an  election  in  the  premises;  and  because  the 
incidents  of  the  situation  made  it  to  his  interest  to  accede  to 
the  demand  made,  so  that  (unless  indeed  he  was  willing  to 
assume  the  resulting  loss)  he  had  no  real  option  in  the  matter, 
his  yielding  was  no  proof  of  intimidation.*^^  In  every  such 
case,  the  controlling  inquiry  is  one  of  means,  and  these  can 
never  be  unlawful  if  what  was  in  fact  done  marks  an  exercise 
of  a  right,  or  a  declaration  of  a  purpose  to  do  that  which  is 
not  in  itself  unlawful. 

e.  The  difference  between  a  valid  unexpired  contract,  and 
no  contract  whatever  or  one  terminable  at  will,  was  repre- 
sented by  "a  chasm. ""^s  Even  if  the  doctrine  of  Lumley  v. 
Gye  be  a  sound  one,  the  one  gave  and  represented  rights ;  the 
other  none.*'^  As  in  the  case  at  bar  each  party  could  sever 
the  relation  at  will,  the  act  of  one  in  doing  so  could  be  made 
the  basis  of  an  action  against  a  third  person  for  having  pro- 

65— Lord    Watson     (100) ;    Lord  67— Lord     Watson     (99) ;     Lord 

Herschell   (137);  Lord  Davey  (173-  HerscheU     (117-118);     Lord     Mac- 

174);    Mathew,    J.    (26:    an   admi-  naghten     (150);     Lord     James     of 

rable  analysis   of  the  proposition);  Hereford   (176). 

Wright,   J.    (66).  68— Lord  Herschell  (121). 

66_Lord    Herschell     (28-30:     an  69— Lord     Watson      (96,      108); 

unanswerable  argument)  ;  Lord  Wat-  Lord  Davey :  "  In  the  one  case  there 

son      (99,      129-130);      Lord     Mac-  is  a  violation  of  right;  in  the  other 

naghten    (148,    151);    Lord    Shand  case  there  is  not"    (171);  Wright, 

(164-166);    Lord    James    of    Here-  J.  (62). 
fcrd   (177). 


THE  COMMON  LAW  347 

cured  such  act  only  upon  proof  that  the  latter  used  unlawful 
means,  i.  e.  thereby  committed  a  tort  causing  damage. 


QUINN  V.  LEATHEM 
(House  of  Lords,  1901.    L.  R.   [1901]  App.  Cas.  495.) 

The  respondent  brought  an  action  in  L-eland  against  five 
defendants.  Craig,  Davey,  Quinn  (the  appellant),  Dornan 
and  Shaw,  alleging  causes  of  action  which  are  summarised  in 
the  judgment  of  Lord  Brampton.  At  the  trial  before  Fitz- 
GiBBON,  L.  J.,  and  a  special  jury  at  Belfast  in  July,  1896, 
evidence  was  given  for  the  plaintiff  to  the  following  effect. 
Craig  "was  president,  Quinn  treasurer,  and  Davey  secretary 
of  a  trade  union  registered  as  the  Belfast  Journeymen  Butch- 
ers and  Assistants'  Association.  By  rule  11  of  the  association 
it  was  the  duty  of  all  members  to  assist  their  fellow  unionists 
to  obtain  employment  in  preference  to  non-society  men. 

The  plaintiff,  a  flesher  at  Lisburn  for  more  than  twenty 
years,  in  July,  1895,  was  employing  Dickie  and  other  assist- 
ants who  were  not  members  of  the  union.  At  a  meeting  of 
the  association  at  which  Craig,  Quinn,  Dornan  and  Shaw 
were  present,  and  which  the  plaintiff  attended  by  Davey 's 
invitation,  the  plaintiff  offered  to  pay  all  fines,  debts  and 
demands  against  his  men,  and  asked  to  have  them  admitted 
to  the  society.  This  was  refused,  and  a  resolution  was  passed 
that  the  plaintiff's  assistants  should  be  called  out.  Craig  told 
the  plaintiff  that  his  meat  would  be  stopped  at  Munce's  if 
he  did  not  comply  with  their  wishes.  Munce,  a  butcher,  had 
been  getting  about  £30  worth  weekly  of  meat  from  the  plain- 
tiff for  twenty  years. 

The  plaintiff  in  his  evidence  said:  "For  the  last  four  years 
Munce  has  had  an  agreement  with  me  to  take  my  fine  meat 
at  so  much  a  pound.  He  expected  me  to  send  it  to  him  every 
week,  and  there  was  no  week  he  did  not  get  it.  I  had  no 
written  agreement  with  him.  Whenever  I  killed  I  sent  it, 
but  I  was  not  bound — only  by  word  of  mouth.  It  was  only 
that  if  1  send  it  he  would  take  it."  What  this  meant  did  not 
clearly     appear,     but    Munce's    clerk   who   was    called   said, 


348    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

''Munce  had  no  contract  with  the  plaintiff:  if  he  wanted  his 
meat  he  could  take  it  or  reject  it  if  he  chose ;  it  came  weekly 
and  was  never  refused.  Neither  was  bound  either  to  take  or 
supply  it." 

In  September,  Davey  wrote  to  the  plaintiff  that  if  he  con- 
tinued to  employ  non-union  labour  the  society  would  be  obliged 
to  adopt  extreme  measures.  After  some  negotiations  with 
Munce,  Davey  wrote  to  him  that  having  failed  to  make  a 
satisfactory  arrangement  with  the  plaintiff,  they  had  no  other 
alternative  but  to  instruct  Munce 's  employees  to  cease  work 
immediately  the  plaintiff's  beef  arrived.  On  September  20 
Munce  sent  a  telegram  to  the  plaintiff,  "Unless  you  arrange 
with  society  you  need  not  send  any  beef  this  week,  as  men 
are  ordered  to  quit  work,"  and  Munce  ceased  to  deal  with 
the  plaintiff.  The  plaintiff  said  that  in  consequence  of  this 
he  was  put  to  great  loss,  a  quantity  of  fine  meat  having  been 
killed  for  Munce. 

Dickie,  who  had  been  ten  years  in  the  plaintiff's  employ, 
was  called  and  said  that  he  was  employed  by  the  week,  that 
he  was  called  out  by  the  society,  that  he  gave  the  plaintiff 
no  notice  when  he  left,  that  he  left  in  the  middle  of  the  week, 
and  that  the  plaintiff  did  not  pay  him  for  the  broken  week. 
There  was  no  evidence  of  damage  to  the  plaintiff,  pecuniary 
or  otherwise,  caused  by  Dickie's  breach  of  contract. 

Evidence  was  given  that  "black  lists"  were  issued  by  the 
society,  containing  {inter  alia)  the  names  of  tradesmen  who 
had  dealings  with  the  plaintiff,  and  one  of  whom  was  induced 
not  to  deal  with  him,  but  there  was  no  evidence  connecting 
Quinn  with  these  lists. 

The  learned  judge's  notes  of  the  evidence  proceeded  thus: 

At  the  close  of  the  plaintiff's  case  " 0 'Shaughnessy,  Q.  C, 
asked  for  a  non-suit  or  direction  for  the  defendants  on  the 
grounds:  First.  That  to  sustain  the  action  a  contract  made 
with  Leathem  must  be  proved  to  have  been  made  and  broken 
through  the  acts  of  the  defendants,  and  that  there  was  no 
evidence  of  such  contract  or  breach.  Second.  That  there 
was  no  evidence  of  pecuniary  damage  to  the  plaintiff  through 
the  acts  of  the  defendants.  Third.  That  the  ends  of  the  de- 
fendants and  the  means  taken  by  them  to  promote  those  ends 


THE  COMMON  LAW  349 

as  appearing  in  evidence  were  legitimate,  and  there  was  no 
evidence  of  actual  damage  to  the  plaintiff. 

"I  declined  to  withdraw  the  case  from  the  jury.  O'Shaugh- 
nessy,  Q.  C,  then  stated  that  he  called  no  evidence  for  the 
defendants.  Chambers  addressed  the  jury  for  the  plaintiff. 
0 'Shaughnessy,  Q.  C,  replied  for  the  defendants.  I  charged 
the  jury,  leaving  them  the  following  questions,  to  which  I 
append  their  findings :  1.  Did  the  defendants  or  any  of  them 
wrongfully  and  maliciously  induce  the  customers  or  servants 
of  the  plaintiff  named  in  the  evidence  to  refuse  to  deal  with 
the  plaintiff?— Answer:  Yes.  2.  Did  the  defendants  or  any 
two  or  more  of  them  maliciously  conspire  to  induce  the  plain- 
tiff's customers  or  servants  named  in  the  evidence  or  any  of 
them  not  to  deal  with  the  plaintiffs  or  not  to  continue  in  his 
employment,  and  were  such  persons  so  induced  not  so  to  do? — • 
Answer:  Yes.  3.  Did  the  defendants  Davey,  Dornan  and 
Shaw,  or  any  of  them,  publish  the  'black  list'  with  intent  to 
injure  the  plaintiff  in  his  business,  and  if  so  did  the  publica- 
tion so  injure  him? — Answer:  Yes. 

"The  jury  found  for  the  plaintiff,  with  £250  damages,  of 
which  £50  was  for  damages  on  the  cause  of  action  relating  to 
the  'black  lists,'  and  £200  was  for  damages  on  the  other 
causes  of  action.  I  directed  the  jury  that  there  was  no  evi- 
dence against  the  defendants  Craig  and  Quinn  upon  the  cause 
of  action  relating  to  the  'black  lists,'  and  I  directed  them  to 
assess  the  damages  (if  any)  on  that  cause  of  action  separately. 
On  the  above  findings,  on  the  application  of  Serjeant  Dodd, 
I  gave  judgment  for  the  plaintiff'  upon  the  other  causes  of 
action  against  all  the  defendants,  with  £200  damages,  and 
against  the  defendants  Davey,  Dornan  and  Shaw  upon  the 
cause  of  action  relating  to  the  'black  lists'  for  the  further 
sum  of  £50  damages. 

"At  the  conclusion  of  my  charge,  0 'Shaughnessy,  Q.  C, 
for  the  defendants,  made  the  following  objections  and  requisi- 
tions : 

"1.  That  I  have  given  the  jury  no  definition  of  damage, 
and  he  asked  me  to  define  damage  as  'actual  loss.' 

"I  told  the  jury  that  pecuniary  loss,  directly  caused  by  the 
conduct  of  the  defendants,  must  be  proved  in  order  to  estab- 
lish a  cause  of  action,  and  I  advised  them  to  require  to  be 


350    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

satisfied  that  such  loss  to  a  substantial  amount  had  been 
proved  by  the  plaintiff.  I  declined  to  tell  them  that  if  actual 
and  substantial  pecuniary  loss  was  proved  to  have  been 
directly  caused  to  the  plaintiff  by  the  wrongful  acts  of  the 
defendants,  they  were  bound  to  limit  the  amount  of  damages 
to  the  precise  sum  so  proved.  I  told  them  that  if  the  plaintiff 
gave  the  proof  of  actual  and  substantial  loss  necessary  to 
maintain  the  action,  they  were  at  liberty  in  assessing  damages 
to  take  all  the  circumstances  of  the  case,  including  the  con- 
duct of  the  defendants,  reasonably  into  account. 

"2.  That  I  had  told  the  jury  that  the  liability  of  the  de- 
fendants depended  on  a  question  of  law,  and  that  as  the 
defendants  could  not  give  their  testimony  as  to  their  own 
intentions,  observations  which  I  had  made  upon  their  non- 
production  amounted  to  misdirection. 

"I  did  not  tell  the  jury  that  the  liability  of  the  defendants 
depended  on  any  question  of  law.  I  told  them  that  the  ques- 
tions left  to  them  were  questions  of  fact  to  be  determined  on 
the  evidence,  but  that  they  included  questions  as  to  the  intent 
of  the  defendants,  and,  in  particular,  their  intent  to  injure 
the  plaintiff  in  his  trade  as  distinguished  from  the  intent  of 
legitimately  advancing  their  own  interests.  I  did  not  tell  the 
jury  that  the  defendants  could  be  directly  asked  what  their 
own  intention  was,  but  I  did  tell  them  that  their  intention  was 
to  be  inferred  from  their  acts  and  conduct  as  proved,  and 
that  in  acting  upon  the  evidence  given  by  the  plaintiff*  they 
were  at  liberty  to  have  regard  to  the  fact  that  the  defendants, 
who  might  have  given  the  best  evidence  on  the  subject,  had 
not  been  produced  to  explain,  qualify  or  contradict  any  of 
the  evidence  given  for  the  plaintiff  as  to  their  overt  acts. 

"3,  That  the  cause  of  action  relating  to  the  'black  list' 
was  separate  and  should  be  separately  left  to  the  jury. 

"I  acceded  to  this  objection,  and  directed  the  jury  that 
there  was  not  sufficient  evidence  to  connect  the  defendants 
Craig  and  Quinn  with  the  publication  of  the  'black  lists.'  As 
against  the  other  three  defendants,  I  told  the  jury  that  their 
acts  in  relation  to  the  'black  lists'  might  be  considered  upon 
the  issues  relating  to  their  intent  and  conduct  generally. 

"4.  That  there  was  no  question  to  go  to  the  jury  because 
no  actual  injury  had  been  proved,  as  there  was  no  evidence 


THE  COMMON  LAW  351 

that  any  binding  contract  with  the  plaintiff  had  been  broken 
through  the  action  of  the  defendants,  and  there  was  no  evi- 
dence of  any  money  loss. 

"Having  told  the  jury  that  the  proof  of  actual  pecuniary 
loss  directly  caused  to  the  plaintiff  by  the  wrongful  acts  of 
the  defendants  must  be  established  by  the  plaintiff  as  the 
foundation  of  the  action,  I  declined  to  withdraw  the  case 
from  them,  having  regard  especially  on  the  question  of  breach 
of  a  binding  contract  to  the  withdrawal  of  Dickie  from  the 
plaintiff's  employment,  and  generally  to  the  evidence  as  to 
the  pecuniary  loss  on  the  sale  of  meat  prepared  for  Munce,  to 
the  loss  of  his  custom,  and  to  the  threat  to  withdraw  his  men 
if  the  plaintiff's  meat  arrived  and  was  received  at  his  shop. 
I  advised  the  jury  not  to  find  for  the  plaintiff  unless  satisfied 
that  he  had  sustained  actual  money  loss  in  his  business  to  a 
substantial  amount.  Upon  the  meaning  of  the  words  'wrong- 
fully and  maliciously'  in  the  questions,  I  told  the  jury  that 
they  had  to  consider  whether  the  intent  and  actions  of  the 
defendants  went  beyond  the  limits  which  would  not  be  action- 
able, namely,  securing  or  advancing  their  own  interests  or 
those  of  their  trade  by  reasonable  means,  including  lawful 
combination,  or  whether  their  acts,  as  proved,  were  intended 
and  calculated  to  injure  the  plaintiff  in  his  trade  through  a 
combination  and  with  a  common  purpose  to  prevent  the  free 
action  of  his  customers  and  servants  in  dealing  with  him,  and 
with  the  effect  of  actually  injuring  him,  as  distinguished  from 
acts  legitimately  done  to  secure  or  advance  their  own  inter- 
ests. As  to  the  'black  lists.'  I  told  the  jury  that  their  pub- 
lication would  be  actionable  if  done,  without  justification,  for 
the  purpose  and  with  the  effect  of  injuring  the  plaintiff  in 
his  business,  by  holding  him  up  to  unpopularity  or  disfavour 
with  or  by  intimidating  those  who  would  otherwise  have  dealt 
with  him.  Finally,  I  told  the  jury  that  acts  done  with  the 
object  of  increasing  the  profits  or  raising  the  wages  of  any 
combination  of  persons,  such  as  the  society  to  which  the 
defendants  belonged,  whether  employers  or  employed,  by 
reasonable  and  legitimate  means,  were  perfectly  lawful,  and 
were  not  actionable  so  long  as  no  wrongful  act  was  mali- 
ciously— that  is  to  say,  intentionally — done  to  injure  a  third 
party.     To  constitute  such  a  wrongful  act  for  the  purposes  of 


352    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

this  case,  I  told  the  jury  that  they  must  be  satisfied  that  there 
had  been  a  conspiracy,  a  common  intention  and  a  combina- 
tion on  the  part  of  the  defendants  to  injure  the  plaintiff  in 
his  business,  and  that  acts  must  be  proved  to  have  been  done 
by  the  defendants  in  furtherance  of  that  intention  which  had 
inflicted  actual  money  loss  upon  the  plaintiff  in  his  trade. 
Whether  the  acts  of  the  defendants  were  or  were  not  in  that 
sense  actionable  was  the  question  which  I  told  the  jury  they 
had  to  try  upon  the  evidence.  At  the  conclusion  of  my  charge, 
at  the  request  of  0 'Shaughnessy,  Q.  C,  for  the  defendants,  I 
■  divided  this  single  question  into  the  written  questions  w^hich 
I  submitted  to  the  jwy  as  above  stated. 

"I  approved  of  the  verdict.  The  amount  of  damages  was 
larger  than  I  might  myself  have  given,  if  it  were  within  my 
province  to  assess  damages.  But  I  cannot  say  that  any  excess 
which  there  may  be  in  the  mere  amount  of  damages  is  either 
so  great,  or  having  regard  to  the  circumstances  of  the  de- 
fendants and  of  the  case,  so  material  as  to  justify  me  in 
expressing  disapproval  of  the  verdict  upon  that  ground 
alone. ' ' 

The  learned  judge  gave  judgment  for  the  plaintiff  for 
£200  on  the  first  and  second  causes  of  action  against  all  the 
defendants,  and  for  the  further  sum  of  £50  damages  on  the 
third  cause  of  action  against  the  defendants  Davey,  Dornan, 
and  Shaw  only,  with  costs. 

A  motion  was  made  "to  set  aside  the  verdict  and  judgment 
and  enter  a  verdict  for  the  defendants,  or,  in  the  alternative, 
for  a  new  trial  on  the  ground  of  misdirection  of  the  learned 
judge  in  refusing  to  direct  for  the  defendants ;  leaving  to  the 
jury  the  case  as  against  all  the  defendants  on  the  evidence; 
and  in  that  on  the  evidence  no  actionable  wrong  was  shewn; 
in  that  he  refused  to  direct  for  the  defendants  in  the  absence 
of  evidence  of  damage  fit  to  be  submitted  to  a  jury;  and  on 
the  further  ground  that  the  learned  judge  misdirected  the 
jury  in  that  he  refused  to  tell  the  jury  their  findings  of 
damages  was  confined  to  damages  shewn  in  the  evidence, 
and,  in  the  alternative,  for  a  new  trial  on  the  ground  that  the 
damages  were  excessive  and  out  of  all  proportion  to  the 
amount  suggested  in  evidence,  and  that  the  learned  judge 
further  allowed  the  jury  to  take  into  account  on  the  question 


THE  COMMON  LAW  353 

of  liability  and  damages  a  certain  paper  in  the  case  called  the 
'black  list,'  and  upon  other  grounds."  This  motion  was 
refused  with  costs  by  the  Divisional  Court  (Andrews,  J., 
O'Brien,  J.,  and  Sir  P.  O'Brien,  C.  J.,  Palles,  C.  B.,  dissenting). 

In  the  Irish  Court  of  Appeal  (Lord  Ashbourne,  L.  C,  Porter, 
M,  R.,  Walker  and  Holmes,  L.  JJ.)  the  decision  below  was 
affirmed  with  costs,  the  judgment  for  the  plaintiff  being 
amended  by  omitting  the  part  as  to  the  recovery  of  £50 
damages.  [Leathern  v.  Craig  [1899]  2  I.  R.  667.]  Quinn 
alone  brought  the  present  appeal. 

Aug.  5.  Earl  of  Halsbury,  L.  C.  My  Lords,  in  this  case 
the  plaintiff  has  by  a  properly  framed  statement  of  claim 
complained  of  the  defendants,  and  proved  to  the  satisfaction 
of  a  jury  that  the  defendants  have  wrongfuJly  and  maliciously 
induced  customers  and  servants  to  cease  to  deal  with  the 
plaintiff,  that  the  defendants  did  this  in  pursuance  of  a  con- 
spiracy framed  among  them,  that  in  pursuance  of  the  same 
conspiracy  they  induced  servants  of  the  plaintiff  not  to  con- 
tinue in  the  plaintiff's  employment,  and  that  all  this  was 
done  with  malice  in  order  to  injure  the  plaintiff,  and  that  it 
did  injure  the  plaintiff.  If  upon  these  facts  so  found  the 
plaintiff  could  have  no  remedy  against  those  who  had  thus 
injured  him,  it  could  hardly  be  said  that  our  jurisprudence 
was  that  of  a  civilized  community,  nor  indeed  do  I  understand 
that  any  one  has  doubted  that,  before  the  decision  in  Allen 
v.  Flood  [[1898]  A.  C.  1],  in  this  House,  such  fact  would  have 
established  a  cause  of  action  against  the  defendants.  Now, 
before  discussing  the  case  of  Allen  v.  Flood,  and  what  was 
decided  therein,  there  are  two  observations  of  a  general  char- 
acter which  I  wish  to  make,  and  one  is  to  repeat  what  I  have 
very  often  said  before,  that  every  judgment  must  be  read  as 
applicable  to  the  particular  facts  proved,  or  assumed  to  be 
proved,  since  the  generality  of  the  expressions  which  may  be 
found  there  are  not  intended  to  be  expositions  of  the  whole 
law,  but  governed  and  qualified  by  the  particular  facts  of  the 
case  in  which  such  expressions  are  to  be  found.  The  other  is 
that  a  case  is  only  an  authority  for  what  it  actually  decides. 
I  entirely  deny  that  it  can  be  quoted  for  a  proposition  that 
may  seem  to  follow  logically  from  it.  Such  a  mode  of  reason- 
ing assumes  that  the  law  is  necessarily  a  logical  code,  whereas 

Kales  R.  of  T.  Vol.  1—23 


354    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

every  lawyer  must  acknowledge  that  the  law  is  not  always 
logical  at  all.  My  Lords,  I  think  the  application  of  these  two 
propositions  renders  the  decision  of  this  case  perfectly  plain, 
notwithstanding  the  decision  of  the  case  of  Allen  v.  Flood. 

Now,  the  hypothesis  of  fact  upon  which  Allen  v.  Flood  was 
decided  by  a  majority  in  this  House,  was  that  the  defendant 
there  neither  uttered  nor  carried  into  effect  any  threat  at  all : 
he  simply  warned  the  plaintiff's  employers  of  what  the  men 
themselves,  without  his  persuasion  or  influence,  had  deter- 
mined to  do,  and  it  was  certainly  proved  that  no  resolution  of 
the  trade  union  had  been  arrived  at  at  all,  and  that  the  trade 
union  official  had  no  authority  himself  to  call  out  the  men, 
which  in  that  case  was  argued  to  be  the  threat  which  coerced 
the  employers  to  discharge  the  plaintiff.  It  was  further  an 
element  in  the  decision  that  there  was  no  case  of  conspiracy 
or  even  combination.  What  was  alleged  to  be  done  was  only 
the  independent  and  single  action  of  the  defendant,  actuated 
in  what  he  did  by  the  desire  to  express  his  own  views  in  favour 
of  his  fellow  members.  It  is  true  that  I  personally  did  not 
believe  that  was  the  true  view  of  the  facts,  but,  as  I  have 
said,  we  must  look  at  the  hypothesis  of  fact  upon  which  the 
case  was  decided  by  the  majority  of  those  who  took  part  in 
the  decision.  My  Lords,  in  my  view  what  has  been  said 
already  is  enough  to  decide  this  case  without  going  further 
into  the  facts  of  Allen  v.  Flood,  but  I  cannot  forbear  accept- 
ing with  cordiality  the  statement  of  them  prepared  by  two  of 
your  Lordships,  Lord  Brampton  and  Lord  Lindley,  with  so 
much  care  and  precision. 

Now,  in  this  case  it  cannot  be  denied  that  if  the  verdict 
stands  there  was  conspiracy,  threats,  and  threats  carried  into 
execution,  so  that  loss  of  business  and  interference  with  the 
plaintiff's  legal  rights  are  abundantly  proved,  and  I  do  not 
understand  the  very  learned  judge  who  dissented  to  have 
doubted  any  one  of  these  propositions,  but  his  view  was 
grounded  on  the  belief  that  Allen  v.  Flood  had  altered  the 
law  in  these  respects,  and  made  that  lawful  which  would 
have  clearly  been  actionable  before  the  decision  of  that  case. 
My  Lords,  for  the  reasons  I  have  given  I  cannot  agree  with 
that  conclusion.  I  do  not  deny  that  if  some  of  the  obser- 
vations made  in  that  case  were  to  be  pushed  to  their  logical 


THE  COMMON  LAW  355 

conclusion  it  would  be  very  difficult  to  resist  the  Chief  Baron's 
inflexible  logic;  but,  with  all  the  respect  which  any  view  of 
that  learned  judge  is  entitled  to  command  and  which  I  un- 
feignedly  entertain,  I  cannot  concur.  This  case  is  distin- 
guished in  its  facts  from  those  which  were  the  essentially 
important  facts  in  Allen  v.  Flood.  Rightly  or  wrongly,  the 
theory  upon  which  judgment  was  pronounced  in  that  case  is 
one  whereby  the  present  is  shewn  to  be  one  which  the  ma- 
jority of  your  Lordships  would  have  held  to  be  a  case  of 
actionable  injury  inflicted  without  any  excuse  whatever. 

My  Lords,  there  was  a  subordinate  question  raised  which  I 
must  not  pass  over.  It  is  suggested  that  FitzGibbon,  L.  J., 
did  not  put  all  the  questions  which  were  necessary  to  raise  all 
the  points  which  the  learned  counsel  desired  to  argue.  Now, 
I  think  the  charge  of  the  Lord  Justice  was  absolutely  ac- 
curate, and  when,  in  deference  to  the  wishes  of  the  learned 
counsel  for  the  defendant  himself,  he  consented  to  put  such 
questions  as  were  then  desired,  it  would  be  intolerable  that 
it  should  afterwards  be  made  the  subject  of  complaint  that 
he  not  at  the  same  time  put  other  questions  which  he  was  not 
asked  to  put  at  all. 

My  Lords,  for  these  reasons  I  am  of  opinion  that  there  is 
no  difficulty  whatever  in  this  case,  and  I  move  that  this 
appeal  be  dismissed  with  costs. 

LORD  MACNAGHTEN.  [Read  by  Lord  Brampton  in 
Lord  Macnaghten's  absence.]  My  Lords,  notwithstanding  the 
strong  language  of  the  late  O'Brien,  J.,  and  the  arguments  of 
the  Lord  Chief  Baron,  I  cannot  help  thinking  that  the  case  of 
Allen  V.  Flood  has  very  little  to  do  with  the  question  now 
under  consideration.  In  my  opinion,  Allen  v.  Flood  laid  down 
no  new  law.  It  simply  brushed  aside  certain  dicta  which  in 
the  opinion  of  the  majority  of  this  House  were  contrary  to 
principle  and  unsupported  by  authority.  Those  dicta  are  first 
to  be  found  in  the  judgment  delivered  by  Lord  Esher  on  be- 
half of  himself  and  Lord  Selborne  in  Bowen  v.  Hall  [6  Q.  B. 
D.  333].  They  were  repeated  by  Lord  Esher  and  Lopes, 
L.  J.,  in  Temperton  v.  Russell  [  [1893]  1  Q.  B.  715]  ;  but  they 
were  not,  I  think,  necessary  for  the  decision  in  either  case. 
They  did  form  the  ground  of  decision  in  Allen  v.  Flood  in  its 


356    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

earlier  stages.  But  in  the  end  the  law  was  restored  to  the 
condition  in  which  it  was  before  Lord  Esher's  views  in  Bowen 
V.  Hall  [6  Q.  B.  D.  333]  and  Temperton  v.  Russell,  were  ac- 
cepted by  the  Court  of  Appeal.  The  head-note  to  Allen  v. 
Flood,  might  well  ha.ve  run  in  words  used  by  Parke,  B.,  in 
giving  the  judgment  of  an  exceptionally  strong  court,  nearly 
half  a  century  ago  (Stevenson  v.  Newnham  [(1853)  13  C.  B. 
297]) — ''an  act  ivhich  does  not  amount  to  a  legal  injury  can- 
not he  actianahle  because  it  is  done  with  a  bad  intent."  That, 
in  my  opinion,  is  the  sum  and  substance  of  Allen  v.  Flood,  if 
you  eliminate  all  matters  of  merely  passing  interest — the 
charge  of  the  learned  judge,  the  findings  of  the  jury  (unintel- 
ligible, I  think  without  a  careful  examination  of  the  evidence), 
and  the  discussion  of  the  evidence  itself  in  the  two  different 
aspects  in  which  it  was  presented — once  for  the  consideration 
of  the  House,  and  again  for  the  consideration  of  the  learned 
judges  by  whom  the  House  was  assisted. 

The  case  really  brought  under  review  on  this  appeal  is  Tem- 
perton V.  Russell.  I  cannot  distinguish  that  case  from  the 
present.  The  facts  are  in  substance  identical:  the  grounds  of 
decision  must  be  the  same.  Now,  the  decision  in  Temperton 
V.  Russell  was  not  overruled  in  Allen  v.  Flood,  nor  is  the 
authority  of  Temperton  v.  Russell,  in  my  opinion,  shaken  in 
the  least  by  the  decision  in  Allen  v.  Flood.  Disembarrassed 
of  the  expressions  which  Lord  Esher  unfortunately  used,  the 
judgment  in  Temperton  v.  Russell  seems  to  me  to  stand  on 
surer  ground.  So  far  from  being  impugned  in  Allen  v.  Flood, 
it  had,  I  think,  the  approval  of  Lord  Watson,  whose  opinion 
seems  to  me  to  represent  the  views  of  the  majority  better  far 
than  any  other  single  judgment  delivered  in  the  case.  Lord 
Watson  says  [  [1898]  A.  C.  108.]  that  he  did  not  think  it  neces- 
sary to  notice  at  length  Temperton  v.  Russell,  because  it  was 
to  his  mind  "very  doubtful  whether  in  that  case  there  was 
any  question  before  the  Court  with  regard  to  the  effect  of  the 
animus  of  the  actor  in  making  that  unlawful  which  would 
otherwise  have  been  lawful. ' '  Then  he  goes  on  to  say :  ' '  The 
only  findings  of  the  jury  which  the  Court  had  to  consider 
were — (1)  that  the  defendants  had  maliciously  induced  cer- 
tain persons  to  break  their  contracts  with  the  plaintiffs,  and 
(2)  that  the  defendants  had  maliciously  conspired  to  induce 


THE  COMMON  LAW  357 

and  had  thereby  induced  certain  persons  not  to  make  contracts 
with  the  plaintiffs.  There  having  been  undisputed  breaches 
of  contract  by  the  persons  found  to  have  been  indu-ced,  the 
first  of  these  findings  raised  the  same  question  which  had  been 
disposed  of  in  Lumley  v.  Gye  [2  E.  &  B.  216].  According  to 
the  second  finding  the  persons  induced  merely  refused  to  make 
contracts,  which  was  not  a  legal  wrong  on  their  part  but  the 
defendants  who  induced  were  found  to  have  accomplished 
their  object  to  the  injury  of  the  plaintiffs  by  means  of  unlaw- 
ful conspiracy — a  clear  ground  of  liability  according  to  Lum- 
ley V.  Gye,  if,  as  the  Court  held,  there  was  evidence  to  prove 
it."  It  must  be  admitted,  I  think,  that  the  second  reference 
to  Lumley  v.  Gye,  in  the  passage  I  have  just  quoted  is  a  slip — • 
a  rare  occurrence  in  a  judgment  of  Lord  Watson's.  But  I 
do  not  think  that  the  slip  (if  it  be  a  slip)  impairs  the  effect  of 
what  Lord  Watson  said.  Obviously  Lord  Watson  was  con- 
vinced in  his  own  mind  that  a  conspiracy  to  injure  might  give 
rise  to  civil  liability  even  though  the  end  were  brought  about 
by  conduct  and  acts  which  by  themselves  and  apart  fi'om  the 
element  of  combination  or  concerted  action  could  not  be  re- 
garded as  a  legal  wrong. 

Precisely  the  same  questions  arise  in  this  case  as  arose  in 
Temperton  v,  Russell.  The  answers,  I  think,  must  depend  on 
precisely  the  same  considerations.  Was  Lumley  v.  Gye  rightly 
decided?  I  think  it  was.  Lumley  v.  Gye  was  much  considered 
in  Allen  v.  Flood.  But  as  it  was  not  directly  in  question,  some 
of  your  Lordships  thought  it  better  to  suspend  their  judgment. 
In  this  case  the  question  arises  directly,  and  it  is  necessary  to 
express  an  opinion  on  the  point.  Speaking  for  myself,  I  have 
no  hesitation  in  saying  that  I  think  the  decision  was  right, 
not  on  the  ground  of  malicious  intention — that  was  not,  I 
think,  the  gist  of  the  action — but  on  the  ground  that  a  viola- 
tion of  legal  right  committed  knowingly  is  a  cause  of  action, 
and  that  it  is  a  violation  of  legal  right  to  interfere  with  con- 
tractual relations  recognized  by  law  if  there  be  no  sufficient 
justification  for  the  interference. 

The  only  other  question  is  this:  Does  a  conspiracy  to  in- 
jure, resulting  in  damage,  give  rise  to  civil  liability?  It  seems 
to  me  that  there  is  authority  for  that  proposition,  and  that  it 
is  founded  in  good  sense.    Gregory  v.  Duke  of  Brunswick  [6 


358    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

M.  &  G.  205,  953.]  is  one  authority  and  there  are  others.    There 
are  valuable  observations  on  the  subject  in  Erle,  J.'s  charge 
to  tlie  jury  in  Duffield's  Case  [  (1851)   5  Cox  C.  C.  404.]   and 
Rowland's  Case  [(1851)  5  Cox  C.  C.  436].     Those  were  cases 
of  trade  union  outrages ;  but  the  observations  to  which  I  refer 
are  not  confined  to  cases  depending  on  exploded  doctrines  in 
regard  to  restraint  of  trade.    There  are  also  weighty  observa- 
tions to  be  found  in  the  charge  delivered  by  Lord  FitzGerald, 
then  FitzGerald,  J.,  in  Reg.  v.  Parnell  and  Others  [  (1881)  14 
Cox  C.  C.  508].     That  a  conspiracy  to  injure — an  oppressive 
combination — differs  widely  from  an  invasion  of  civil  rights 
by  a  single  individual  cannot  be  doubted.    I  agree  in  substance 
with  the  remarks  of  Bowen,  L.  J.,  and  Lords  Bramwell  and 
Hannen  in  the  Mogul  Case   [23  Q.  B.  D.  598;    [1892]   A.  C. 
25].    A  man  may  resist  without  much  difficulty  the  wrongful 
act  of  an  individual.     He  would  probably  have  at  least  the 
moral  support  of  his  friends  and  neighbours;  but  it  is  a  very 
different  thing  (as  Lord  FitzGerald  observes)  when  one  man 
has  to  defend  himself  against  many  combined  to  do  him  wrong. 
I  have  only  to  add  that  I  agree  generally  with  the  judg- 
ments delivered  in  the  Courts  below,  and  particularly  with  the 
judgment   of   Andrews,   J.,   in   the   Queen's   Bench,    and  the 
judgment    of  Holmes,  L.  J.,  in  the  Court  of  Appeal.     I  do 
not  think  that  the  acts  done  by  the  defendants  were  done  "in 
contemplation  or  furtherance  of  a  trade  dispute  between  em- 
ployers and  workmen."     So  far  as  I  can  see,  there  was  no 
trade  dispute  at  all.    Leathem  had  no  difference  with  his  men. 
They  had  no  quarrel  with  him.     For  his  part  he  was  quite 
willing  that  all  his  men  should  join  the  union.    He  offered  to 
pay  their  fines  and  entrance  moneys.     What  he  objected  to 
was  a  cruel  punishment  proposed  to  be  inflicted  on  some  of 
his  men  for  not  having  joined  the  union  sooner.     There  was 
certainly  no  trade  dispute  in  the  case  of  Munce.     But  the 
defendants  conspired  to  do  harm  to  Munce  in  order  to  compel 
him  to  do  harm  to  Leathem,  and  so  enable  them  to  wreak  their 
vengeance  on  Leathem 's  servants  who  were  not  members  of 
the  union. 

I  also  think  that  the  provision  in  the  Conspiracy  and  Pro- 
tection O'f  Property  Act,  1875,  which  says  that  in  certain  cases 


THE  COMMON  LAW  359 

an  agreement  or  combination  is  not  to  be  "  indictable  as  a  con- 
spiracy," has  nothing  to  do  with  civil  remedies. 

LORD  SHAND.  [Read  by  Lord  Davey  in  Lord  Shand's 
absence.]  My  Lords,  after  the  able  and  full  opinions  of  the 
learned  judges  of  the  Court  of  Appeal  in  Ireland  holding  that 
the  verdict  and  judgment  for  the  plaintiff  ought  to  stand,  the 
grounds  of  my  opinion  that  the  judgment  ought  to  be  affirmed 
and  the  appeal  dismissed  may  be  shortly  stated.  I  refrain 
from  any  detailed  reference  to  the  numerous  cases  cited  in 
the  argument.  These  have  been  considered  and  discussed  by 
the  judges  of  the  Court  of  Appeal,  and  I  concur  in  the  reason- 
ing of  the  majority  of  their  Lordships,  and  they  have  been 
already  dealt  with  in  my  judgment  in  the  case  of  Allen  v. 
Flood. 

In  that  case  I  expressed  my  opinion  that  while  combination 
of  different  persons  in  pursuit  of  a  trade  object  was  lawful, 
although  resulting  in  such  injury  to  others  as  may  be  caused 
by  legitimate  competition  in  labor,  yet  that  combination  for 
no  such  object,  but  in  pursuit  merely  of  a  malicious  purpose 
to  injure  another,  would  be  clearly  unlawful ;  and,  having  con- 
sidered the  arguments  in  this  case,  my  opinion  has  only  been 
confirmed. 

The  learned  judge  before  whom  the  case  was  tried,  with 
reference  to  the  words  "wrongfully  and  maliciously"  in  the 
first  question,  told  the  jury  that  the  questions  to  be  answered 
by  them  were  matters  of  fact  only  to  be  determined  on  the 
evidence,  and  in  particular  involved  the  question  whether  the 
intention  of  the  defendants  was  to  injure  the  plaintiff  in  his 
trade,  as  distinguished  from  the  intention  of  legitimately  ad- 
vancing their  own  interest.  The  verdict  affirms  that  this  was 
the  fact,  for  after  the  direction  of  the  learned  judge  no  other 
interpretation  can  be  given  to  the  finding  that  the  acts  com- 
plained of  were  done  by  the  defendants  "wrongfully  and 
maliciously. ' ' 

This  being  clearly  so,  the  question  now  raised  is  really 
whether,  in  consequence  of  the  decision  of  this  House  in  the 
case  of  Allen  v.  Flood,  and  of  the  grounds  on  which  that  case 
was  decided,  it  is  now  the  law  that  where  the  acts  complaijied 
of  are  in  pursuance  of  a  combination  or  conspiracy  to  injure 


360    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

or  ruin  another,  and  not  to  advance  the  parties'  own  trade 
interests,  and  injury  has  resulted,  no  action  will  lie,  or,  to 
put  the  question  in  a  popular  form,  whether  the  decision  in 
Allen  V.  Flood  has  made  boycotting  lawful. 

Apart  from  the  decision  in  that  case,  the  judgment  of  the 
learned  judges  in  Ireland  would  have  been  unanimous  in 
affirming  the  principle  to  which  FitzGibbon,  L.  J.,  gave  ef- 
fect. The  general  law  cannot,  I  think,  be  more  happily  stated 
than  in  the  passage  from  the  judgment  of  Lord  Bowen  in  the 
Mogul  Case  [23  Q.  B.  D.  614.],  wliich  was  quoted  by  the  Lord 
Chancellor  with  an  expression  of  his  strong  approval  in  the 
case  of  Allen  v.  Flood  [  [1898]  A.  C.  at  p.  74].  [His  Lordship 
read  the  passage.]  The  Lord  Chancellor  also  spoke  with  ap- 
proval, as  I  should  certainly  do,  of  the  views  to  a  similar  effect 
stated  by  Sir  William  Erie  in  his  work  on  Trade  Unions. 

It  may  be  true  that  in  certain  cases  the  object  of  inflicting 
injury,  and  success  in  that  object,  requires  combination  or 
conspiracy  with  others  in  order  to  be  effectual.  That  was  not 
so  in  all  of  the  cases  enumerated  by  Lord  Bowen;  but  no 
question  on  that  point  arises  in  the  circumstances  of  this  par- 
ticular case,  for  according  to  the  evidence  and  the  verdict  of 
the  jury  the  defendants  by  combined  action  wrongfully  and 
maliciously  induced  a  number  of  persons  to  refrain  from  deal- 
ing with  the  plaintiff.  That  is  sufficient  for  the  decision  of 
the  case,  although,  in  my  opinion,  it  is  further  proved  that 
they  succeeded  in  inducing  a  servant  and  a  customer  of  the 
plaintiff  to  break  existing  contracts  with  him.  On  the  whole, 
it  seems  to  me  clear  that  the  defendants  were  guilty  of  unlaw- 
ful acts,  unless  the  judgment  in  the  case  of  Allen  v.  Flood 
[  [1898]  A.  C.  1.]  has  introduced  a  change  which  has  rendered 
such  acts  lawful. 

As  to  the  vital  distinction  between  Allen  v.  Flood  and  the 
present  case,  it  may  be  stated  in  a  single  sentence.  In  Allen 
V.  Flood,  the  purpose  of  the  defendant  was  by  the  acts  com- 
plained of  to  promote  his  own  trade  interest,  which  it  was 
held  he  was  entitled  to  do,  although  injurious  to  his  competi- 
tors, whereas  in  the  present  case,  while  it  is  clear  there  was 
combination,  the  purpose  of  the  defendants  was  "to  mjure  the 
plaintiff  in  his  trade  as  distinguished  from  the  intention  of 
legitimately  advancing  their  own  interests. "    It  is  unnecessary 


THE  COMIVION  LAW  361 

to  quote  from  the  judgments  of  the  majority  of  the  learned 
judges  in  Allen  v.  Flood  to  shew  their  opinions  on  the  im- 
portance of  this  essential  point.  Lord  Hershchell,  for  exam- 
ple, said  [  [1898]  A.  C.  at  p.  132.]:  "The  object  which  the 
defendant  and  those  whom  he  represented  had  in  view  through- 
out was  what  they  believed  to  be  the  interest  of  the  class  to 
which  they  belonged;  the  step  taken  was  a  means  to  that  end." 
And  the  other  noble  and  learned  Lords  in  the  majority  ex- 
pressed themselves  to  a  similar  effect.  For  myself,  what  I 
said  was  this  [  [1898]  A.  C.  at  p.  163.]  :  "If  anything  is  clear 
on  the  evidence,  it  seems  to  me  to  be  this,  that  the  defendant 
was  bent,  and  bent  exclusively,  on  the  object  of  furthering 
the  interests  of  those  he  represented  in  all  he  did;  that  this 
was  his  motive  of  action,  and  not  a  desire,  to  use  the  words  of 
the  learned  judge,  'to  do  mischief  to  the  plaintiffs  in  their 
lawful  calling.'  The  case  was  one  of  competition  in  labour, 
which,  in  my  opinion,  is  in  all  essentials  analogous  to  com- 
petition in  trade,  and  to  which  the  same  principles  must  apply." 

The  ground  of  judgment  of  the  majority  of  the  House,  how- 
ever varied  in  expression  by  their  Lordships,  was,  as  it  appears 
to  me,  that  Allen  in  what  he  said  and  did  was  only  exercising 
the  right  of  himself  and  his  fellow  workmen  as  competitors 
in  the  labour  market,  and  the  effect  of  injury  thus  caused  to 
others  from  such  competition,  which  was  legitimate,  was  not 
a  legal  wrong. 

It  is  only  necessary  to  add  that  the  defendants  here  have  no 
such  defense  as  legitimate  trade  competition.  Their  acts  were 
wrongful  and  malicious  in  the  sense  found  by  the  jury — that 
is  to  say,  they  acted  by  conspiracy,  not  for  any  purpose  of 
advancing  their  own  interests  as  workmen,  but  for  the  sole 
purpose  of  injuring  the  plaintiff  in  his  trade.  I  am  of  opinion 
that  the  law  prohibits  such  acts  as  unjustifiable  and  illegal; 
that  by  so  acting  the  defendants  were  guilty  of  a  clear  viola- 
tion of  the  rights  of  the  plaintiff,  with  the  result  of  causing 
serious  injury  to  him,  and  that  the  case  of  Allen  v.  Flood,  as 
a  case  of  legitimate  competition  in  the  labour  market,  is  essen- 
tially different,  and  gives  no  ground  for  the  defendant's  argu- 
ment. 

I  concur  with  your  Lordships  in  holding  that  there  is  not 
sufficient  ground  for  disturbing  the  verdict  on  the  question 


362    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

of  damages,  and  in  holding  that  the  special  provision  of  the 
3rd  section  of  the  Conspiracy  Act  of  1875  has  no  application 
to  the  circumstances  of  this  ease. 

LORD  BRAMPTON.  My  Lords,  this  case  now  awaiting 
your  Lordships'  final  judgment  is  one  which,  looked  at  sunply 
as  affecting  the  parties  to  it,  is  of  no  serious  pecuniary  con- 
cern; but  it  involves,  nevertheless,  questions  of  widespread 
importance  to  every  trader  and  to  every  employer  and  servant 
engaged  in  trade. 

It  is  an  action  originally  brought  in  the  High  Court  in  Ire- 
land by  Henry  Leathem,  the  respondent,  as  plaintiff,  against 
Joseph  Quinn  (the  sole  appellant)  and  four  other  persons, 
named  respectively  John  Craig  (now  dead),  John  Davey, 
Henry  Dornan,  and  Robert  Shaw,  as  defendants,  to  recover 
damages  for  a  wrongful  interference  with  the  plaintiff's  busi- 
ness of  a  butcher  at  Lisburn,  a  few  miles  from  Belfast.  For 
upwards  of  twenty  years  before  July,  1895,  Leathem  had  car- 
ried on  business  in  Lisburn,  having  as  one  of  his  constant 
customers  Andrew  Munce  (now  also  dead),  who  kept  a 
butcher's  shop  at  Belfast,  to  whom  he  supplied  weekly  twenty 
or  thirty  pounds'  worth  of  the  best  meat;  and  he  had  in  his 
employ  as  assistants  several  men  at  weekly  wages. 

In  February,  1893,  a  trade  union  society  was  registered  un- 
der the  Trade  Union  Acts,  1871  and  1876,  by  the  name  of 
"The  Belfast  Journeymen  Butchers  and  Assistants'  Associa- 
tion." Of  this  society  Craig  was  president,  Quinn  treasurer, 
and  Davey  secretary;  they  were  original  members;  the  other 
defendants,  Dornan  and  Shaw,  joined  subsequently  as  mere 
ordinary  members.  Leathem  was  not  a  member,  nor  were  any 
of  his  assistants.  The  members  of  the  society  amongst  them- 
selves soon  adopted  an  unregistered  rule  that  they  would  not 
work  with  non-union  men,  nor  would  they  cut  up  meat  that 
came  from  a  place  where  non-union  hands  were  employed ;  but 
there  was  no  evidence  that,  prior  to  July,  1895,  this  had  been 
productive  of  any  conflict  between  Leathem 's  men  and  the 
union. 

Early  in  that  month,  however,  Leathem,  on  the  invitation  of 
Davey,  attended  a  meeting  of  the  society  held  at  Lisburn.  All 
the  defendants  were  there.     The  occurrences  at  this  meeting 


THE  COMMON  LAW  363 

shewed  the  existence  of  an  angry  feeliiig,  and  an  overbearing 
determination  on  the  part  of  the  defendants  to  compel  Leathem 
to  employ  none  but  union  men,  which  culminated  in  the  law- 
less conduct  the  subject  of  this  action. 

Leathem  had  at  that  time  among  his  assistants  a  man  named 
Robert  Dickie,  a  family  man,  with  young  children  dependent 
upon  him ;  this  man  had  been  in  his  employ  for  ten  years.  He 
was  desirous  of  keeping  him  and  all  the  others  employed  by 
him  in  his  service,  but  still  of  doing  anything  in  reason  to  con- 
ciliate the  society.  But  I  had  better  let  him  tell  his  account 
of  this  meeting  in  his  own  words,  as  he  told  it  to  the  jury. 
"I  said  that  I  came  on  behalf  of  my  men,  and  was  ready  to 
pay  all  fines,  debts,  and  demands  against  them;  and  I  asked 
to  have  them  admitted  to  the  society.  The  defendant  Shaw 
got  up  and  objected  to  their  being  allowed  to  work  on,  and 
to  their  admission,  and  said  that  my  men  should  be  put  out  of 
my  employment,  and  could  not  be  admitted,  and  should  w^alk 
the  streets  for  twelve  months.  I  said  it  was  a  hard  case  to 
make  a  man  walk  the  streets  with  nine  small  children,  and  I 
would  not  submit  to  it.  Shaw  moved  a  resolution  that  my 
assistants  should  be  called  out ;  a  man  named  Morgan  seconded 
the  resolution,  and  it  was  carried.  Craig  was  in  the  chair;  I 
was  sitting  beside  him.  He  said  there  were  some  others  there 
that  would  suit  me  as  well.  He  picked  some  out  and  said  they 
could  work  for  me.  I  said  they  were  not  suitable  for  my  busi- 
ness, and  I  would  keep  the  men  I  had.  They  said  I  had  to 
take  them.  I  said  I  would  not  put  out  my  men.  Craig  then 
spoke,  and  told  me  my  meat  would  be  stopped  in  Andrew 
Munce's  if  I  would  not  comply  with  their  wishes." 

The  chairman  spoke  truly;  for  on  September  6  the  secretary 
of  the  society  wrote  to  Leathem,  asking  "whether  he  had 
made  up  his  mind  to  continue  to  employ  non-union  labour," 
adding,  "If  you  continue  as  at  present,  our  society  will  be 
obliged  to  adopt  extreme  measures  in  your  case."  He  wrote 
also  to  Mr.  Munce  on  September  13,  stating  that  a  deputation 
had  been  appointed  to  wait  upon  him  to  come  to  a  decision  in 
regard  to  his  purchase  of  meat  from  Leathem  &  Sons,  as  they 
were  anxious  to  have  a  settlement  at  once.  To  this  letter  Mr. 
Munce  sent,  on  September  14,  a  very  sensible  reply:  "It  is 
quite  out  of  my  province  to  interfere  with  the  liberty  of  any 


364    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

man.  But  why  refer  to  me  in  the  matter?  I  do  not  think  it 
fair  for  you  to  come  to  me,  seeing  it  appears  to  be  the  Messrs. 
Leathem  that  you  wish  to  interfere  with."  A  deputatioji, 
which  included  Craig,  Quinn,  Shaw,  and  Dornan,  had  an  inter- 
view with  a  son  of  Mr.  A.  Munce,  and  on  September  17  he 
wrote  to  the  secretary  the  reply  of  his  father,  "that  he  could 
not  interfere  to  bring  pressure  to  bear  on  Mr.  Leathem  to 
employ  none  but  society  men  by  refusing  to  purchase  meat 
from  him,  as  that  would  be  outside  his  province  and  interfer- 
ing with  the  liberty  of  another  man."  The  18th  of  September 
brought  a  definite  announcement  from  the  secretary  to  Mr. 
Munce  that,  having  failed  to  make  a  satisfactory  arrangement 
with  Mr.  Leathem,  they  had  no  other  alternative  but  to  in- 
struct his  (Munce 's)  employees  "to  cease  work  immediately 
Leathem 's  beef  arrives."  Thereupon  Mr.  Munce  was  con- 
strained to  send  to  Leathem  on  September  20  a  telegram: 
"Unless  you  arrange  with  society  you  need  not  send  any  beef 
this  week,  as  men  are  ordered  to  quit  work."  On  and  from 
that  day  Munce  took  no  more  meat  from  Leathem,  to  his  sub- 
stantial loss. 

Another  mode  adopted  by  several  of  the  defendants  with  a 
view  to  prevent  persons  dealing  with  Leathem  was  the  publi- 
cation throughout  the  district  of  Lisburn  of  "black  lists" 
containing  and  holding  up  to  odium,  not  only  his  name,  but 
the  names  of  persons  who  dealt  with  him,  as  a  warning  to 
those  persons  that  if  they  wished  their  names  to  be  removed 
from  the  lists  they  must  have  no  more  dealings  with  him  or 
any  other  non-society  shops.  Amongst  others,  a  man  named 
McBride,  a  customer  of  Leathem,  was  operated  on  by  this 
mode,  and  ceased  to  deal  with  him;  attempts  were  also  made 
by  means  of  such  lists  to  influence  two  other  men  named  Davis 
and  Hastings.  With  the  object  of  further  inconveniencing 
Leathem  in  his  trade,  two  of  his  weekly  servants.  Rice  and 
McDonnell,  who  had  been  non-union  men,  were  somehow  or 
other  induced  to  join  the  society  and  to  quit  their  service  with 
Leathem.  It  is  true  they  gave  due  notice  of  their  intention  to 
do  so,  and  as  regards  them,  therefore,  no  separate  cause  of 
action  could  be  maintained.  But  it  is  significant  that  after 
they  had  left  their  service  they  were  paid  by  the  society  dur- 
ing the  time  they  were  out  of  work  weekly  sums  of  money  as 


THE  COMMON  LAW  365 

compensation  for  the  wages  they  would  have  earned  with 
Leathern.  As  regards  the  assistant,  Robert  Dickie,  he  left  his 
service  without  any  notice  in  the  middle  of  a  week,  and  so 
wrongfully  broke  his  contract  with  his  employers,  and  there 
was  an  abundance  of  evidence  that  he  was  induced  to  do  that 
wrongful  act  through  the  unjustifiable  influence  of  the  defend- 
ants, for  Dickie 's  evidence  at  the  trial  was  that  he  was  brought 
out  of  Leathem's  shop  by  Rice  to  a  meeting  of  the  society  in 
a  room  over  the  defendant  Dornan's  shop;  that  Shaw  (an- 
other defendant)  was  there;  that  they  wanted  him  to  leave 
Leathern  because  the  rest  were  out,  and  promised  to  pay  him 
what  he  had  from  Leathem;  that  he  left,  and  was  paid  by  Rice 
for  the  society  and  was  then  in  Dornan's  service. 

The  case  came  on  for  trial  at  the  Belfast  Assizes  in  July, 
1896,  before  FitzGibbon,  L.  J.,  and  a  special  jury.  The 
pleadings  charged  in  the  first  four  counts,  as  separate  causes 
of  action,  (1)  the  procuring  Munce  to  break  contracts  he 
had  made  with  Leathem;  (2)  the  publication  by  the  defend- 
ants of  "black  lists";  (3)  the  intimidation  of  Munce  and 
other  persons  to  break  their  contracts;  and  (4)  the  coercion 
of  Dickie  and  other  servants  to  leave  the  service  of  the  plain- 
tiff. Each  of  these  counts  alleged  that  the  acts  complained  of 
were  done  "wrongfully  and  maliciously,  and  with  intent  to 
injure  the  plaintiff,  and  to  have  occasioned  him  actual  loss, 
injury,  and  damage."  The  fifth  and  last  count  charged,  also 
as  a  separate  cause  of  action,  that  the  defendants  unlawfully 
and  maliciously  conspired  together,  and  with  others,  to  do  the 
various  acts  complained  of  in  the  previous  counts,  with  intent 
to  injure  the  plaintiff  and  his  trade  and  business,  and  that  by 
reason  of  the  conspiracy  he  was  injured  and  damaged  in  his 
trade.    Damages  and  an  injunction  were  claimed. 

The  evidence  adduced  I  have  already  set  forth  substantially. 
At  the  conclusion  of  it  Mr.  O'Shaughnessy,  Q.  C,  for  the  de- 
fendants, submitted  that  they  were  entitled  to  a  nonsuit  upon 
the  grounds  that  there  was  no  evidence  of  a  contract  between 
Munce  and  Leathem,  nor  of  any  pecuniary  damage  to  the  plain- 
tiff by  reason  of  the  acts  of  the  defendants,  and  that  the  acts 
of  the  defendants  were  legitimate.  The  learned  Lord  Justice 
refused  to  nonsuit,  and  I  think  he  rightly  refused.  For  there 
was  clearly  evidence  for  the  consideration  of  the  jury  upon 


366    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

one  or  more  of  (I  think  upon  all)  the  causes  of  action.  I  need 
not  discuss  that  point  further,  for  it  was  practically  disposed 
of  during  the  argument  before  this  House. 

No  evidence  was  called  for  the  defendants.  I  regret  that  no 
shorthand  note  of  the  summing-up  of  the  Lord  Justice  was 
furnished  to  your  Lordships.  We  have,  however,  a  copy  of 
the  learned  judge 's  own  notes  and  memoranda.  From  a  care- 
ful perusal  of  these  I  am  satisfied  that  every  indulgence  that 
could  have  been  reasonably  given  to  the  learned  counsel  in 
presenting  his  case  to  the  jury  was  allowed  him,  and  I  am 
satisfied  that  he  must  be  taken  to  have  acquiesced  in  the  form 
in  which  the  questions  submitted  for  the  consideration  of  the 
jury  were  left  to  them,  even  though  it  might  otherwise  have 
been  open  to  criticism. 

After  commenting  upon   the   evidence  relied  upon  by  the 
plaintiff  as  proof  of  actionable  misconduct,  he  told  the  jury 
that  they  had  to  consider  whether  the  interest  and  actions  of 
the  defendants  went  beyond  the  limits  which  would  not  be 
actionable,  namely,  securing  or  advancing  their  own  interests 
or  those  of  their  trade  by  reasonable  means,  including  lawful 
combination,  or  whether  their  acts,  as  proved,  were  intended 
and  calculated  to  injure  the  plaintiff  in  his  trade  through  a 
combination  and  with  a  common  purpose  to  prevent  the  free 
action  of  his  customers  and  servants  in  dealing  with  him,  and 
with  the  effect  of  actually  injuring  him  as  distinguished  from 
acts  legitimately  done  to  secure  or  advance  their  own  interests ; 
that  acts  done  with  the  object  of  increasing  the  profits  or  rais- 
ing the  wages  of  any  combination  of  persons,  such  as   the 
society  to  which  the  defendants  belonged,  by  reasonable  and 
legitimate  means  were  perfectly  lawful,  and  were  not  action- 
able so  long  as  no  wrongful  act  was  maliciously — that  is  to 
say,  intentionally— done  to  injure  a  third  party.     To  consti- 
tute such  a  wrongful  act  for  the  purposes  of  this  case,  he  told 
the  jury  that  they  must  be  satisfied  that  there  had  been  a 
conspiracy,  a  common  intention  and  a  combination  on  the  part 
of  the  defendants,  to  injure  the  plaintiff  in  his  business,  and 
that  acts  must  be  proved  to  have  been  done  by  the  defendants 
in  furtherance  of  that  intention,  which  had  inflicted  actual 
money  loss  upon  the  plaintiff  in  his  trade.    And  having  so  told 
the  jury,  he  proposed  to  put  to  them  as  the  question  they  had 


THE  COMMON  LAW  367 

to  try  upon  the  evidence,  Whether  the  acts  of  the  defendants 
were  or  were  not  in  that  sense  actionable? 

I  have  thought  it  right,  as  near  as  possible,  to  follow  the 
language  of  the  Lord  Justice,  for  that  charge  was  delivered 
before  Allen  v.  Flood,  was  decided  in  this  House,  In  sub- 
stance I  think  it  was  correct,  having  regard  to  the  case  before 
him.  In  some  respects  it  seems  to  me  that  it  was  a  little  too 
favourable  to  the  defendants,  but  even  had  it  been  otherwise 
it  was  uttered  in  the  presence  of  the  defendants'  counsel,  who 
desired  and  was  allowed  then  and  there  to  make  such  objec- 
tions as  he  thought  fit  to  it.  He  made  four  only:  first,  that 
the  judge  had  given  no  definition  of  damage ;  second,  that  he 
had  told  the  jury  that  the  liability  of  the  defendants  depended 
on  a  question  of  law.  These  two  questions  were  to  my  mind 
conclusively  answered  in  the  summing-up :  see  p.  33  of  Ap- 
pendix. 

A  third  objection  was  that  the  question  relating  to  the  black 
list  should  be  separately  left  to  the  jury.  It  was  then  so  left, 
and  as  to  that  the  judge  directed  them  that  there  was  not  suffi- 
cient evidence  to  connect  Quinn  and  Craig  with  the  black 
lists.  By  this  I  take  it  he  meant  not  as  an  independent  cause 
of  action,  there  being,  in  fact,  no  evidence  of  Quinn 's  personal 
participation  in  the  publication  of  those  lists.  But  that  left 
him  still  affected  by  them  as  overt  acts  of  the  conspiracy,  for 
each  of  which  every  one  of  the  conspirators  is  liable,  and  the 
evidence  touching  the  black  lists  was  beyond  all  question 
admissible  under  the  conspiracy  count. 

The  fourth  objection  was  that  there  was  no  evidence  of  any 
binding  contract  having  been  broken  through  the  action  of 
the  defendants;  but  the  judge  then  again  declined  to  withdraw 
that  question  of  contract  from  the  jury,  and  I  think  he  was 
right  in  so  refusing  at  that  stage  of  the  trial;  and  at  a  later 
stage,  after  the  whole  matter  had  been  disposed  of  under  the 
conspiracy  count,  he  rightly  refrained  from  putting  the  ques- 
tion at  all,  because  it  had  become  unnecessary.  At  the  request 
of  the  learned  counsel,  however,  he  divided  the  single  general 
question  he  at  first  proposed  into  the  three  separate  questions — 
(1)  Did  the  defendants,  or  any  of  them,  wrongfully  and 
maliciously  induce  the  customers  or  servants  of  the  plaintiff 
named  in  the  evidence  to  refuse  to  deal  with  the  plaintiff? 


368    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

(2)  Did  the  defendants,  or  any  two  or  more  of  them  maliciously 
conspire  to  induce  the  plaintiff's  customers  or  servants  named 
in  the  evidence,  or  any  of  them,  not  to  deal  with  the  plaintiff 
or  not  to  continue  in  his  employment,  and  were  such  persons 
so  induced  not  to  do  so?  (3)  Did  the  defendants  Davey,  Dor- 
nan,  and  Shaw,  or  any  of  them,  publish  the  "black  list"  with 
intent  to  injure  the  plaintiff  in  his  business,  and,  if  so,  did 
the  publication  so  injure  him?  The  jury  answered  each  of 
these  questions  in  the  affirmative,  and  assess  the  damages 
against  all  the  defendants  at  £200;  and  with  regard  to  the 
third  qviestion,  they  found  against  the  defendants  Dornan, 
Davey,  and  Shaw,  with  an  additional  £50  as  damages  against 
them  only.  Judgment  was  given  in  accordance  with  that 
verdict. 

If,  my  Lords,  before  that  judgment  was  given  the  counsel 
for  either  party  had  felt  it  of  importance  that  the  specific 
issues  raised  upon  each  count  should  be  determined  by  the 
jury,  the  learned  judge  would,  no  doubt,  have  applied  himself 
to  attain  that  object ;  but  when,  as  it  oftentimes  happens  in 
the  course  of  a  trial,  it  is  obvious  to  everybody  concerned  in 
it  that  the  case  may  conveniently  be  determined  by  the  answer 
of  the  jury  to  one  general  comprehensive  question  involving 
the  whole  of  the  material  matters  at  issue,  and  all  parties 
either  expressly  or  tacitly  acquiesce  in  that  view,  and  such 
question  is  accordingly  put  to  and  answered  by  the  jury, 
neither  party  can  afterwards  hark  back  to  the  original  issues 
raised  by  the  pleader  on  the  record  long  before  it  was  possible 
for  him  to  know  how  the  case  can  best  be  dealt  with  when  the 
evidence  is  all  disclosed.  Here  the  real  substantial  question 
was  whether  there  had  existed  between  all  or  any  two  or  more 
of  the  defendants  an  unlawful  conspiracy  to  injure  the  plain- 
tiff in  his  trade,  and,  if  so,  whether  the  plaintiff  had  been 
specially  injured  thereby,  all  the  wrongful  acts  charged  in 
the  previous  counts  being  treated  as  overt  acts  of  such  con- 
spiracy. To  support  that  conspiracy  count  it  was  not  essential 
that  every  overt  act  alleged  should  be  proved,  but  only  a 
sufficient  number  of  them  to  support  the  count.  The  issues 
on  that  count  having  been  found  by  the  jury,  and  damages 
assessed  in  favor  of  the  plaintiff,  the  separate  issues  become 
immaterial,  since  they  had  already  been  treated  as  incorporated 


THE  COMMON  LAW  369 

for  all  purposes  of  the  action  in  it.  I  note,  in  confirmation  of 
this,  that  the  Lord  Justice  pointedly  told  the  jury  that  proof 
of  a  conspiracy  was  essential  to  the  support  of  the  action. 

In  substance,  this  finding  of  the  jury  amounted  to  a  general 
verdict  against  all  the  defendants,  except  on  the  issue  relating 
to  the  black  lists,  with  £200  damages,  and  as  to  that  issue 
against  Davey,  Dornan,  and  Shaw  only,  with  separate  and 
further  damages,  £50. 

Rightly  understood  I  think  the  judgment  in  Allen  v.  Flood 
is  harmless  to  the  present  case.  But  I  need  hardly  say  that, 
in  order  properly  to  understand  and  appreciate  it,  it  is  essen- 
tial to  ascertain  what  were  the  material  facts  assumed  to  exist 
by  their  Lordships  who  assented  to  that  judgment,  and  what 
were  the  principles  of  law  applied  by  them  to  those  facts.  This 
necessity  will  be  more  apparent  when  it  is  realized  that  unan- 
imity of  opinion  as  to  the  facts  certainly  did  not  prevail,  that 
the  judges  who  were  called  upon  to  render  their  assistance  to 
the  House  were  requested  to  answer  this  one  simple  question 
only,  namely,  "Assuming  the  evidence  given  by  the  plaintiffs' 
witnesses  to  be  correct,  was  there  any  evidence  of  a  cause  of 
action  fit  to  be  left  to  the  jury?"  This  evidence  was  only  to 
be  found  in  the  Appendix  handed  to  each  of  the  judges  as 
containing  the  evidence  referred  to,  and  to  that  evidence  the 
judges  naturally  applied  themselves,  and  upon  it  their  opin- 
ions were  formed.  That  evidence  of  the  plaintiffs'  witnesses 
most  certainly  did  not  altogether  coincide  with  some  very 
material  facts  assumed  by  their  Lordships;  this  will  account 
for  variance  in  the  views  expressed  as  to  the  legal  rights  and 
alleged  wrongful  acts  of  the  parties.  It  would  be  an  endless 
task  to  endeavour  to  reconcile  all  these  differences  of  fact  and 
opinion ;  I  will  not,  therefore,  make  the  attempt. 

Some  of  this  confusion  arose  no  doubt  from  the  course  taken, 
rightly  or  wrongly,  at  the  trial,  when  all  questions  of  con- 
spiracy, intimidation,  coercion,  or  breach  of  contract  were 
withdrawn  from  the  jury,  the  only  matters  of  fact  found  by 
them  being  that  Allen  maliciously  induced  the  Glengall  Com- 
pany to  discharge  Flood  and  Taylor  from  their  employment, 
and  not  to  engage  them  again,  and  that  each  plaintiff  had  suf- 
fered £20  damages. 

I  collect  from  the  case,  as  reported,  that  it  was  assumed  by 

Kalea  R.  of  T.  Vol.  1—24 


370    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

their  Lordships  that  the  Glengall  Company  were  under  no 
contractual  obligation  to  retain  the  plaintiffs  Flood  and  Tay- 
lor in  their  service  for  any  duration  of  time,  but  might  dismiss 
them  from  their  employment  at  any  moment  it  was  their  will 
so  to  do,  and  that  the  boiler-makers  were  working  under  the 
same  conditions;  that  Allen  in  making  the  communication 
which  induced  the  Glengall  Company  to  dismiss  the  plaintiffs 
was  doing  only  that  which  he  had  a  legal  right  to  do,  and  they 
held,  therefore,  that  the  plaintiffs  had  no  legal  cause  of  action 
against  either  the  Glengall  Company  or  the  defendant,  and 
that  the  mere  fact  as  found  by  the  jury  that  the  defendant  wa« 
actuated  by  a  malicious  motive  could  not  convert  a  rightful 
into  a  wrongful  act. 

This  latter  proposition,  that  the  exercise  of  an  absolutely 
legal  right  cannot  be  treated  as  wrongful  and  actionable 
merely  because  a  malicious  intention  prompted  such  exercise, 
was  established  as  clear  law  by  this  House  in  Bradford  Cor- 
poration v.  Pickles  [  [1895]  A.  C.  587.],  and  it  is  now  too  late 
to  dispute  it,  even  if  one  were  disposed  to  do  so,  which  I  am 
not.  It  must  not,  however,  be  supposed  that  a  malicious  inten- 
tion can  in  no  case  be  material  to  the  maintenance  of  an  action. 
It  is  commonly  used  to  defeat  the  defence  of  privilege  to  do  or 
to  say  that  which  without  privilege  would  be  wrongful  and 
actionable. 

Take  the  familiar  instance  of  an  action  for  malicious  prose- 
cution. It  is  not  a  wrongful  act  for  any  person  who  honestly 
believes  that  he  has  reasonable  and  probable  cause,  though  he 
has  it  not  in  fact,  to  put  the  criminal  law  in  motion  against 
another;  but  if  to  the  absence  of  such  reasonable  and  prob- 
able cause  a  malicious  motive  operating  upon  the  mind  of 
such  prosecutor  is  added,  that  which  would  have  been  a  right- 
ful (in  the  sense  of  a  justifiable)  act  if  done  without  malice 
becomes  with  malice  wrongful  and  actionable.  What  would 
constitute  such  malice  it  is  not  material  for  the  purposes  of 
this  case  to  define.  Of  course,  if  when  he  instituted  criminal 
proceedings  the  prosecutor  knew  he  had  no  reasonable  ground 
for  the  steps  he  was  taking,  the  definition  of  malice  given  by 
Bayley,  J.,  in  Bromage  v.  Prosser  [4  B.  &  C.  247;  28  R.  R. 
241]  would  distinctly  apply,  and  no  further  proof  of  malice 
would  be  required ;  but  if  he  really  believed  he  had  such  rea- 


THE  COMMON  LAW  371 

sonable  cause,  although  in  fact  he  had  it  not,  and  was  actuated 
not  by  such  belief  alone,  but  also  by  personal  spite  or  a  desire 
to  bring  about  the  imprisonment  of  or  other  harm  to  the 
accused,  or  to  accomplish  some  other  sinister  object  of  his 
own,  that  personal  enmity  or  sinister  motive  would  be  quite 
sufficient  to  establish  the  malice  required  by  law  to  complete 
a  cause  of  action — that  is,  if  such  malice  was  found  as  a  fact 
by  the  jury. 

In  this  case  the  alleged  cause  of  action  is  very  different  from 
that  in  Allen  v.  Flood.  It  is  not  dependent  upon  coercion  to 
break  any  particular  contract  or  contracts,  though  such  causes 
of  action  are  introduced  into  the  claim;  but  the  real  and  sub- 
stantial cause  of  action  is  an  unlawful  conspiracy  to  molest 
the  plaintiff,  a  trader,  in  carrying  on  his  business,  and  by  so 
doing  to  invade  his  undoubted  right,  thus  described  by  Al- 
derson,  B.,  in  delivering  the  judgment  of  the  Exchequer 
Chamber  in  Hilton  v.  Eckersley  [6  E.  &  B.  74.]  :  "Prima  facie 
it  is  the  privilege  of  a  trader  in  a  free  country  in  all  matters 
not  contrary  to  law  to  regulate  his  own  mode  of  carrying  it 
on  according  to  his  own  discretion  and  choice.  If  the  law  has 
in  any  matter  regulated  or  restrained  his  mode  of  doing  this, 
the  law  must  be  obeyed.  But  no  power  short  of  the  general 
law  ought  to  restrain  his  free  discretion." 

To  this  I  would  add  the  emphatic  expression  of  the  Lord 
Chancellor,  Lord  Halsbury,  in  the  Mogul  Case  [  [1892]  A. 
C.  38.]  :  "All  are  free  to  trade  upon  what  terms  they  will"; 
and  of  Lord  Bramwell,  who  in  Reg.  v.  Druitt  [10  Cox.  C. 
C.  600.],  in  a  passage  quoted  by  Lord  Halsbury  in  the  same 
case  [  [1892]  A.  C.  at  p.  73.],  said:  "The  liberty  of  a  man's 
mind  and  will  to  say  how  he  should  bestow  himself  and  his 
means,  his  talents  and  his  industry,  was  as  much  a  subject  of 
the  law's  protection  as  was  that  of  his  body."  Again,  Sir 
W.  Erie  thus  expresses  himself:  "Every  person  has  a  right 
under  the  law  as  between  himself  and  his  fellow-subjects  to 
full  freedom  in  disposing  of  his  own  labour  or  his  own  capital 
according  to  his  will.  It  follows  that  every  other  person  is 
subject  to  the  correlative  duty  arising  therefrom,  and  is  pro- 
hibited from  any  obstruction  to  the  fullest  exercise  of  this 
right  which  can  be  made  compatible  with  the  exercise  of  sim- 
ilar rights  by  others."     [Erie  on  Trade  Unions,  p.  12.]     I 


372    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

am  uot  aware  that  the  rights  thus  stated  have  ever  been  seri- 
ously questioned.  I  rest  my  judgment  upon  the  principle 
expressed  in  these  few  sentences,    I  seek  for  no  more. 

The  remedy  for  the  invasion  of  a  legal  right  is  thus  stated  by 
Lord  Watson  in  his  judgment  in  Allen  v.  Flood  [[1898]  A. 
C.  at  p.  92.]  :  "Any  invasion  of  the  civil  rights  of  another 
person  is  in  itself  a  legal  wrong,  carrying  with  it  liability  to 
repair  its  necessary  or  natural  consequences  in  so  far  as  these 
are  injurious  to  the  person  whose  right  is  infringed." 

I  cannot  suppose  any  intelligent  person  reading  the  evidence 
adduced  on  the  trial  of  this  case  failing  to  come  to  the  con- 
clusion that  the  acts  complained  of  amounted  to  a  serious  and 
wrongful  invasion  of  the  plaintiff's  trade  rights,  and  I  am  at 
a  loss  to  comprehend  upon  what  ground  it  is  that  the  defend- 
ants seek  to  justify  or  excuse  their  action  towards  him. 

As  members  of  a  trade  union  society  they  have  no  more 
legal  right  to  commit  what  would  otherwise  be  unlawful 
wrongs  than  if  the  association  to  which  they  are  attached  had 
never  come  into  existence.  They  have  no  more  right  to  coerce 
others  pursuing  the  same  calling  as  themselves  to  join  their 
society,  or  to  adopt  their  views  or  rules,  than  those  who  differ 
from  them  and  belong  to  other  trade  associations  would  have 
a  right  to  coerce  them.  The  Legislature  in  conferring  upon 
trades  unions  such  privileges  as  are  contained  in  the  Trade 
Union  Acts,  1871  and  1876,  does  not  empower  them  to  do  more 
than  make  rules  for  the  regulation  of  their  own  conduct  and 
to  provide  for  their  own  mutual  assistance,  and  leaves  each 
member  as  free  to  cease  to  belong  to  it  and  to  repudiate  every 
obligation  for  future  observance  of  its  rules  as  though  he  had 
never  joined  it;  and  most  certainly  it  has  not  conferred  upon 
any  association  or  any  member  of  it  a  licence  to  obstruct  or 
interfere  with  the  freedom  of  any  other  person  in  carrying  on 
his  business  or  bestowing  his  labour  in  the  way  he  thinks  fit, 
provided  only  that  it  is  lawful:  see  Erle,  J.,  in  Reg.  v.  Row- 
lands [(1851)  2  Den.  C.  C.  364.]  ;  and  although  a  combination 
of  members  of  a  trade  union  for  certain  purposes  is  no  longer 
unlawful  and  criminal  as  a  conspiracy  merely  because  the 
objects  of  that  combination  are  in  restraint  of  trade,  no  pro- 
tection is  given  to  any  combination  or  conspiracy  which  be- 


THE  COMMON  LAW  373 

fore  the  passing  of  the  Act  of  1871  would  have  been  criminal 
for  other  reasons. 

Not  a  word  is  to  be  found  in  the  Trade  Union  Acts  or  in 
the  Conspiracy  Act  of  1875  sanctioning  such  conduct  as  that 
complained  of.  Indeed,  one  cannot  read  the  7th  section  of 
the  latter  Act  imposing  penalties  for  undue  coercion  and  in- 
timidation without  seeing  that  it  had  no  intention  to  tolerate 
such  proceedings  as  in  this  case  are  complained  of,  but  rather 
to  protect  those  upon  whom  coercive  measures  might  be  prac- 
tised. I  may  also  note  that  the  3rd  section  of  that  Act  does 
not  apply  to  civil  proceedings  by  action. 

It  would  not  be  useful  to  examine  again  all  the  numerous 
cases  upon  the  citation  and  discussion  of  which  much  time  has 
been  expended,  for  not  one  of  them  would  really  assist  the 
appellant  in  defence  of  his  or  his  co-conspirators'  conduct. 

The  Mogul  Case  [[1892]  A.  C.  25.]  contains  no  doubt  a 
mass  of  valuable,  interesting,  and  useful  law  as  to  the  length 
to  which  competing  traders  may  go  in  pushing  and  endeavour- 
ing to  promote  their  respective  interests,  and  yet  keep  within 
bounds  that  are  legal,  though  the  stronger  and  more  wealthy 
of  them  may  sometimes  press  hardly  upon  the  weaker  whose 
capital  is  limited.  One  trader  may  by  his  mode  of  carrying  on 
his  trade  hold  out  attractions  and  allurements  which  may 
enlist  so  many  of  his  rival's  customers  as  will  well-nigh,  per- 
haps wholly,  destroy  his  trade. 

But  not  a  word  will  be  found  in  that  case  justifying  an 
active  interference  with  the  right  of  every  trader  to  carry  on 
his  business  in  his  own  manner,  so  long  as  he  does  not  inter- 
fere with  a  similar  legal  right  which  is  vested  in  his  neighbour 
and  observes  the  correlative  duty  pointed  out  by  Sir  W.  Erie. 

My  noble  friend,  the  Lord  Chancellor,  accurately  summed 
up  the  position  of  things  in  the  Mogul  Case  [[1892]  A.  C.  25.] 
in  these  words:  "What  legal  right  was  interfered  with? 
What  coercion  of  the  mind,  will,  or  person  is  effected?  All 
are  free  to  trade  on  what  terms  they  will,  and  nothing  has 
been  done  except  in  rival  trading  which  could  be  supposed  to 
interfere  with  the  appellant's  interests." 

But  I  will  not  linger  upon  a  consideration  of  what  may  be 
done  in  competition,  for  competition  is  not  even  suggested  as 
a  justification  of  the  acts  now  complained  of — acts  of  wanton 


374    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

aggression  the  outcome  of  a  malicious  but  successful  conspiracy 
to  harm  the  plaintiff  in  his  trade. 

It  cannot  be — it  was  not  even  suggested — that  these  acts 
were  done  in  furtherance  of  any  of  the  lawful  objects  of  the 
association  as  set  forth  in  their  registered  rules,  according  to 
the  statutory  requirements,  or  in  support  of  any  lawful  right 
of  the  association  or  any  member  of  it,  or  to  obtain  or  main- 
tain fair  hours  of  labour  or  fair  wages,  or  to  promote  a  good 
understanding  between  employers  and  employed  and  work- 
man and  workman,  or  for  the  settlement  of  any  dispute,  for 
none  had  existence.  It  would,  indeed,  be  a  strange  mode  of 
promoting  such  good  understanding  to  coerce  a  tradesman's 
customers  to  leave  him  because  he  would  not,  at  the  bidding 
of  the  association,  dismiss  workmen  who  desired  to  continue 
in  his  service  and  whom  he  wished  to  retain  to  make  way  for 
others  he  did  not  want. 

I  will  deal  now  with  the  conspiracy  part  of  the  claim,  re- 
specting which  much  confusion  and  uncertainty  seems  some- 
how to  have  arisen,  which  I  find  it  difficult  to  understand.  I 
have  no  intention,  however,  to  embark  upon  a  history  of  the 
law  relating  to  the  subject,  or  to  the  old  and  obsolete  writ  of 
conspiracy.    It  would  be  useless  for  our  present  purpose. 

I  will  endeavour  brieflly  to  state  how  I  view  the  matter  prac- 
tically, so  far  as  it  concerns  this  case. 

A  conspiracy  consists  of  an  unlawful  combination  of  two  or 
more  persons  to  do  that  which  is  contrary  to  law  or  to  do  that 
which  is  wrongful  and  harmful  towards  another  person.  It 
may  be  punished  criminally  by  indictment,  or  civilly  by  an 
action  on  the  case  in  the  nature  of  conspiracy  if  damage 
has  been  occasioned  to  the  person  against  whom  it  is  directed. 
It  may  also  consist  of  an  unlawful  combination  to  carry  out 
an  object  not  in  itself  unlawful  by  unlawful  means.  The  es- 
sential elements,  whether  of  a  criminal  or  of  an  actionable 
conspiracy,  are,  in  my  opinion,  the  same,  though  to  sustain  an 
action  special  damage  must  be  proved.  This  is  the  substance 
of  the  decision  in  Barber  v.  Lesiter.  [7  C.  B.  (N.  S.)  175.]  I 
quote  as  a  very  instructive  definition  of  a  conspiracy  the  words 
of  a  great  lawyer,  Willes,  J.,  in  Mulcahy  v.  Reg.  [(1868)  L. 
R.  3  H.  L.  at  p.  317.],  in  delivering  the  unanimous  opinion  of 
himself,  Blackburn.  J..  Bramvtell,  B.,  Keating,  J.,  and  Pigott, 


THE  COMMON  LAW  375 

B.,  which  was  adopted  by  this  House:  "A  conspiracy  con- 
sists not  merely  in  the  intention  of  two  or  more,  but  in  the 
agreement  of  two  or  more  to  do  an  unlawful  act,  or  to  do  a 
lawful  act  by  unlawful  means.  So  long  as  such  a  design  rests 
in  intention  only  it  is  not  indictable.  When  two  agree  to 
carry  it  into  effect,  the  very  plot  is  an  act  in  itself,  and  the 
act  of  each  of  the  parties,  promise  against  promise,  actus  cantra 
actum,  capable  of  being  enforced,  if  lawful,  punishable  if  for  a 
criminal  object  or  for  the  use  of  criminal  means.  .  .  .  The 
number  and  the  compact  give  weight  and  cause  danger." 

It  is  true  these  words  were  uttered  touching  a  criminal  case, 
but  they  are  none  the  less  applicable  to  conspiracies  made  the 
subject  of  civil  actions  like  the  present. 

In  1870  CocKBURN,  C.  J.,  in  delivering  the  unanimous  judg- 
ment of  Channell,  B.,  Cleasby,  B.,  Keating  and  Brett,  JJ.,  iu 
Reg.  V.  Warburton  [L.  R.  I.  C.  C.  276.],  said:  "It  is  not 
necessary,  in  order  to  constitute  a  conspiracy,  that  the  acts 
agreed  to  be  done  should  be  acts  which  if  done  should  be  crim- 
inal. It  is  enough  if  the  acts  agreed  to  be  done,  although  not 
criminal,  are  wrongful,  i.  e.,  amount  to  a  civil  wrong." 

It  has  often  been  debated  whether,  assuming  the  existence 
of  a  conspiracy  to  do  a  wrongful  and  harmful  act  towards 
another  and  to  carry  it  out  by  a  number  of  overt  acts,  no  one 
of  which  taken  singly  and  alone  would,  if  done  by  one  individ- 
ual acting  alone  and  apart  from  any  conspiracy,  constitute  a 
cause  of  action,  such  acts  would  become  unlawful  or  action- 
able if  done  by  the  conspirators  acting  jointly  or  severally  in 
pursuance  of  their  conspiracy,  and  if  by  those  acts  substantial 
damage  was  caused  to  the  person  against  whom  the  conspiracy 
was  directed:  my  own  opinion  is  that  they  would. 

In  dealing  with  the  question  it  must  be  borne  in  mind  that 
a  conspiracy  to  do  harm  to  another  is,  from  the  moment  of  its 
formation,  unlawful  and  criminal,  though  not  actionable  un- 
less damage  is  the  result. 

The  overt  acts  which  follow  a  conspiracy  fonn  of  themselves 
no  part  of  the  conspiracy :  they  are  only  things  done  to  carry 
out  the  illicit  agreement  already  formed,  and  if  they  are  suffi- 
cient to  accomplish  the  wrongful  object  of  it,  it  is  immaterial 
whetber  singly  those  acts  would  have  been  innocent  or  wrong- 
ful,  for  they  have  in  their  combination  brought   about  the 


376    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

intended  mischief,  and  it  is  the  wilful  doing  of  that  mischief, 
coupled  with  the  resulting  damage,  which  constitutes  the  cause 
of  action,  not  of  necessity  the  means  by  which  it  was  accom- 
plished. 

Much  consideration  of  the  matter  has  led  me  to  be  convinced 
that  a  number  of  actions  and  things  not  in  themselves  action- 
able or  unlawful  if  done  separately  without  conspiracy  may, 
with  conspiracy,  become  dangerous  and  alarming,  just  as  a 
grain  of  gunpowder  is  harmless  but  a  pound  may  be  highly 
destructive,  or  the  administration  of  one  grain  of  a  particular 
drug  may  be  most  beneficial  as  a  medicine  but  administered 
frequently  and  in  larger  quantities  with  a  view  to  harm  may 
be  fatal  as  a  poison.  Many  illustrations  of  these  views  might 
be  suggested,  but  I  need  them  not  if  I  have  made  myself 
understood. 

The  cases  bearing  upon  the  subject  are  not  very  numerous; 
the  whole  subject  was  fully  discussed  in  the  Mogul  Case  ( [1892] 
A.  C.  25.)  in  each  of  its  stages — to  it  I  simply  refer.  Rex  v. 
Journeymen  Tailors  of  Cambridge  [(8  Geo.  1)  8  Mod.  11.] 
was  an  indictment  for  a  common  law  conspiracy  by  workmen 
to  raise  wages.  On  objection  taken  to  the  indictment  it  was 
upheld  for  the  reason  given  that  the  conspiracy  was  illegal, 
although  the  matter  about  which  they  conspired  might  have 
been  lawful  for  them  or  any  to  do  if  they  had  not  conspired  to 
do  it;  and  Rex  v.  Eccles  [1  Lea.  C.  C.  274.],  before  Lord 
Mansfield,  was  an  indictment  for  a  conspiracy  by  indirect 
means  to  deprive  and  hinder  one  Booth  from  using  and  exer- 
cising his  trade  of  a  tailor,  and  in  pursuance  of  that  conspiracy 
hindering  and  preventing  him  from  following  his  said  trade 
to  his  great  damage.  It  was  held  unnecessary  to  set  out  the 
means  by  which  the  intended  mischief  was  effected,  "for  the 
offence  does  not  consist  in  doing  those  acts,  for  they  may  be 
perfectly  indifferent,  but  in  conspiring  with  a  view  to  effect 
the  intended  mischief  by  any  means.  The  illegal  combination 
is  the  gist  of  the  offence."  See  also  per  Grose,  J.,  in  R.  v. 
Mawbey.     [(1796)  6  T.  R.  619;  3  R.  R.  282.] 

If  I  rightly  understand  the  judgment  of  Dabling,  J.,  in  Hut- 
tley  V.  Simmons  [[1898]  1  Q.  B.  181.],  he  treated  Allen  v. 
Flood,  as  a  binding  authority  compelling  him  to  hold  that  the 
object  of  the  conspiracy  as  proved  was  not  unlawful;  in  that 


THE  COMMON  LAW  377 

view  he  rightly  decided  that  the  count  for  conspiracy  could 
not  be  maintained.  If  he  had  held  that,  although  the  objects 
of  the  conspiracy  was  unlawful,  yet  if  the  overt  acts  were  not 
so,  because  they  would  not  have  been  unlawful  if  done  by  one 
individual  without  any  conspiracy,  and  had  decided  on  that 
ground,  I  should  have  differed. 

I  am  conscious  that  I  have  occupied  more  of  your  Lordships ' 
time  than  I  had  intended,  but  the  case  is  of  real  importance, 
and  I  feel  that  such  unlawful  conduct  as  has  been  pursued 
towards  Mr.  Leathern  demanded  serious  attention.  I  think 
the  law  is  with  him,  and  that  the  damages  awarded  by  the 
jury  are  under  the  circumstances  very  moderate.  It  is  at  all 
times  a  painful  thing  for  any  individual  to  be  the  object  of 
the  hatred,  spite,  and  ill-will  of  any  one  who  seeks  to  do  him 
harm.  But  that  is  as  nothing  compared  to  the  danger  and 
alarm  created  by  a  conspiracy  formed  by  a  number  of  un- 
scrupulous enemies  acting  under  an  illegal  compact,  together 
and  separately,  as  often  as  opportunity  occurs  regardless  of 
law,  and  actuated  by  malevolence,  to  injure  him  and  all  who 
stand  by  him.  Such  a  conspiracy  is  a  powerful  and  dangerous 
engine,  which  in  this  case  has,  I  think,  been  employed  by  the 
defendants  for  the  perpetration  of  organized  and  ruinous 
oppression. 

I  think  the  judgment  in  the  Court  below  ought  to  be  affirmed 
and  this  appeal  dismissed  with  costs. 

LORD  ROBERTSON.  [Read  by  Lord  Davey  in  Lord 
Robertson's  absence.]  My  Lords,  in  my  opinion  the  judg- 
ment appealed  against  was  right  for  the  reasons  given  by 
Holmes,  L.  J. 

LORD  LINDLEY.     [Read  by  Lord  Davey  in  Lord  Lind- 

ley's  absence.]  My  Lords,  the  case  of  Allen  v.  Flood,  has  so 
important  a  bearing  on  the  present  appeal  that  it  is  necessary 
to  ascertain  exactly  what  this  House  really  decided  in  that 
celebrated  case.  It  was  an  action  by  two  workmen  of  an  iron 
company  against  three  members  of  a  trade  union,  namely, 
Allen  and  two  others,  for  maliciously,  wrongfully,  and  with 
intent  to  injure  the  plaintiffs,  procuring  and  inducing  the  iron 
company  to  discharge  the  plaintiffs.     [[1895]  2  Q.  B.  22,  23; 


378    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

[1898]  A.  C.  3.]  The  action  was  tried  before  Kennedy,  J., 
who  ruled  that  there  was  no  evidence  to  go  to  the  jury  of 
conspiracy,  intimidation,  coercion,  or  breach  of  contract.  The 
result  of  the  trial  was  that  the  plaintiffs  obtained  a  verdict 
and  judgment  against  Allen  alone.  He  appealed,  and  the  only 
question  which  this  House  had  to  determine  was  whether  what 
he  had  done  entitled  the  plaintiffs  to  maintain  their  action 
against  him.  What  the  jury  found  that  he  had  done  was,  that 
he  had  maliciously  induced  the  employers  of  the  plaintiffs  to 
discharge  them,  whereby  the  plaintiffs  suffered  damage.  Dif- 
ferent views  were  taken  by  the  noble  Lords  who  heard  the 
appeal  as  to  Allen's  authority  to  call  out  the  members  of  the 
union,  and  also  as  to  the  means  used  by  Allen  to  induce  the 
employers  of  the  plaintiffs  to  discharge  them ;  but,  in  the  opin- 
ion of  the  noble  Lords  who  formed  the  majority  of  your  Lord- 
ships' House,  all  that  Allen  did  was  to  inform  the  employers 
of  the  plaintiffs  that  most  of  their  workmen  would  leave  them 
if  they  did  not  discharge  the  plaintiffs.  [[1898]  A.  C.  p.  19, 
Lord  Watson;  p.  115  Lord  Herschell;  pp.  147-150  Lord  Mac- 
naghten;  pp.  161,  165  Lord  Shand;  p.  175  Lord  Davey;  p. 
178  Lord  James.]  There  being  no  question  of  conspiracy, 
intimidation,  coercion,  or  breach  of  contract  for  consideration 
by  the  House,  and  the  majority  of  their  Lordships  having 
come  to  the  conclusion  that  Allen  had  done  no  more  than  I 
have  stated,  the  majority  of  the  noble  Lords  held  that  the 
action  against  Allen  would  not  lie;  that  he  had  infringed  no 
right  of  the  plaintiffs ;  that  he  had  done  nothing  which  he  had 
no  legal  right  to  do,  and  that  the  fact  that  he  had  acted 
maliciously  and  with  intent  to  injure  the  plaintiffs  did  not, 
without  more,  entitle  the  plaintiffs  to  maintain  the  action. 

My  Lords,  this  decision,  as  I  understand  it,  establishes  two 
propositions :  one  a  far-reaching  and  extremely  important  prop- 
osition of  law,  and  the  other  a  comparatively  unimportant 
proposition  of  mixed  law  and  fact,  useful  as  a  guide,  but  of  a 
very  different  character  from  the  first. 

The  first  and  important  proposition  is  that  an  act  otherwise 
lawful,  although  harmful,  does  not  become  actionably  by  be- 
ing done  maliciously  in  the  sense  of  proceeding  from  a  bad 
motive,  and  with  intent  to  annoy  or  harm  another.  This  is  a 
legal  doctrine  not  new  or  laid  down  for  the  first  time  in  Allen 


THE  COMMON  LAW  379 

V.  Flood;  it  had  been  gaining  ground  for  some  time,  but  it 
was  never  before  so  fully  and  authoritatively  expounded  as  in 
that  case.  In  applying  this  proposition  care,  however,  must 
be  taken  to  bear  in  mind,  first,  that  in  Allen  v.  Flood,  criminal 
responsibility  had  not  to  be  considered.  It  would  revolutionise 
criminal  law  to  say  that  the  criminal  responsibility  for  con- 
duct never  depends  on  intention.  Secondly,  it  must  be  borne 
in  mind  that  even  in  considering  a  person's  liability  to  civil 
proceedings  the  proposition  in  question  only  applies  to  "acts 
otherwise  lawful,"  i.  e.,  to  acts  involving  no  breach  of  duty, 
or,  in  other  words,  no  wrong  to  any  one.  I  shall  refer  to  this 
matter  later  on. 

The  second  proposition  is  that  what  Allen  did  infringed  no 
right  of  the  plaintiffs,  even  although  he  acted  maliciously  and 
with  a  view  to  injure  them.  I  have  already  stated  what  he 
did,  and  all  that  he  did,  in  the  opinion  of  the  majority  of  the 
noble  Lords.  If  their  view  of  the  facts  was  correct,  their  con- 
clusion that  Allen  infringed  no  right  of  the  plaintiffs  is  per- 
fectly intelligible,  and  indeed  unavoidable.  Truly,  to  inform 
a  person  that  others  will  annoy  or  injure  him  unless  he  acts 
in  a  particular  way  cannot  of  itself  he  actionable,  whatever 
the  motive  or  intention  of  the  informant  may  have  been. 

My  Lords,  the  question  whether  Allen  had  more  power  over 
the  men  than  some  of  their  Lordships  thought,  and  whether 
Allen  did  more  than  they  thought,  are  mere  questions  of  fact. 
Neither  of  these  questions  is  a  question  of  law,  and  no  Court 
or  jury  is  bound  as  a  matter  of  law  to  draw  from  the  facts 
before  it  inferences  of  fact  similar  to  those  drawn  by  noble 
Lords  from  the  evidence  relating  to  Allen  in  the  case  before 
them. 

I  will  pass  now  to  the  facts  of  this  case,  and  consider  (1.) 
what  the  plaintiff's  rights  were;  (2.)  what  the  defendants' 
conduct  was;  (3.)  whether  that  conduct  infringed  the  plain- 
tiff's rights.  For  the  sake  of  clearness  it  will  be  convenient 
to  consider  these  questions  in  the  first  place  apart  from  the 
statute  which  legalises  strikes,  and  in  the  next  place  with 
reference  to  that  statute. 

1.  As  to  the  plaintiff's  rights.  He  had  the  ordinary  rights 
of  a  British  subject.  He  was  at  liberty  to  earn  his  own  living 
in  his  own  way,  provided  he  did  not  violate  some  special  law 


380    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

prohibiting  him  from  so  doing,  and  provided  he  did  not  in- 
fringe the  rights  of  other  people.  This  liberty  involved  liberty 
to  deal  with  other  persons  who  were  willing  to  deal  with  him. 
This  liberty  is  a  right  recognised  by  law ;  its  correlative  is  the 
general  duty  of  every  one  not  to  prevent  the  free  exercise  of 
this  liberty,  except  so  far  as  his  own  liberty  of  action  may 
justify  him  in  so  doing.  But  a  person's  liberty  or  right  to 
deal  with  others  is  nugatory,  unless  they  are  at  liberty  to  deal 
with  him  if  they  choose  to  do  so.  Any  interference  with  their 
liberty  to  deal  with  him  affects  him.  If  such  interference  is 
justifiable  is  point  of  law,  he  has  no  redress.  Again,  if  such 
interference  is  wrongful,  the  only  person  who  can  sue  in  re- 
spect of  it  is,  as  a  rule,  the  person  immediately  affected  by  it ; 
another  who  suffers  by  it  has  usually  no  redress ;  the  damage 
to  him  is  too  remote,  and  it  would  be  obviously  practically  im- 
possible and  highly  inconvenient  to  give  legal  redress  to  all 
who  suffered  from  such  wrongs.  But  if  the  interference  is 
wrongful  and  is  intended  to  damage  a  third  person,  and  he  is 
damaged  in  fact — in  other  words,  if  he  is  wrongfully  and  in- 
tentionally struck  at  through  others,  and  is  thereby  damnified 
■ — the  whole  aspect  of  the  case  is  changed:  the  wrong  done  to 
others  reaches  him,  his  rights  are  infringed  although  indirectly, 
and  damage  to  him  is  not  remote  or  unforeseen,  but  is  the 
direct  consequence  of  what  has  been  done.  Our  law,  as  I 
understand  it,  is  not  so  defective  as  to  refuse  him  a  remedy  by 
an  action  under  such  circumstances.  The  cases  collected  in 
the  old  books  on  actions  on  the  case,  and  the  illustrations  given 
by  the  late  Bowen,  L.  J.,  in  his  admirable  judgment  in  the 
Mogul  Steamship  Company's  Case  [23  Q.  B.  D.  613,  614.], 
may  be  referred  to  in  support  of  the  foregoing  conclusion,  and 
I  do  not  understand  the  decision  in  Allen  v.  Flood  to  be  op- 
posed to  it. 

If  the  above  reasoning  is  correct,  Lumley  v.  Gye  [2  E.  &  B. 
216.]  was  rightly  decided,  as  I  am  of  opinion  it  clearly  was. 
Further,  the  principle  involved  in  it  cannot  be  confined  to 
inducements  to  break  contracts  of  service,  nor  indeed  to  in- 
ducements" to  break  any  contracts.  The  principle  which  under- 
lies the  decision  reaches  all  wrongful  acts  done  intentionally 
to  damage  a  particular  individual  and  actually  damaging  him. 
Temperton  v.  Russell  ought  to  have  been  decided  and  may  be 


THE  COI\I]\ION  LAW  381 

upheld  on  this  principle.  That  case  was  much  criticised  in 
Allen  V.  Flood,  and  not  without  reason;  for,  according  to  the 
judgment  of  Lord  Esher,  the  defendants'  liability  depended 
on  motive  or  intention  alone,  whether  anything  wrong  was 
done  or  not.  This  went  too  far,  as  was  pointed  out  Allen  v. 
Flood.  But  in  Temperton  v.  Russell  there  was  a  wrongful 
act,  namely,  conspiracy  and  unjustifiable  interference  with 
Brentano,  who  dealt  with  the  plaintiff.  This  wrongful  act 
warranted  the  decision,  which  I  think  was  right. 

2.  I  pass  on  to  consider  what  the  defendants  did.  The  ap- 
pellant and  two  of  the  other  defendants  were  the  officers  of  a 
trade  union,  and  the  jury  have  found  that  the  defendants 
wrongfully  and  maliciously  induced  the  customers  of  the  plain- 
tiff to  refuse  to  deal  with  him,  and  maliciously  conspired  to 
induce  them  not  to  deal  with  him.  There  were  similar  findings 
as  to  inducing  servants  of  the  plaintiff  to  leave  him.  What 
the  defendants  did  was  to  threaten  to  call  out  the  union  work- 
men of  the  plaintiff  and  his  customers  if  he  would  not  dis- 
charge some  non-union  men  in  his  employ.  In  other  words,  in 
order  to  compel  the  plaintiff  to  discharge  some  of  his  men, 
the  defendants  threatened  to  put  the  plaintiff  and  his  custom- 
ers, and  persons  lawfully  working  for  them,  to  all  the  incon- 
venience they  could  without  using  violence.  The  defendants' 
conduct  was  the  more  reprehensible  because  the  plaintiff  offered 
to  pay  the  fees  necessary  to  enable  his  non-union  men  to  be- 
come members  of  the  defendants'  union;  but  this  would  not 
satisfy  the  defendants.  The  facts  of  this  case  are  entirely 
different  from  those  which  this  House  had  to  consider  in 
Allen  V.  Flood.  In  the  present  case  there  was  no  dispute  be- 
tween the  plaintiff  and  his  men.  None  of  them  wanted  to 
leave  his  employ.  Nor  was  there  any  dispute  between  the 
plaintiff's  customers  and  their  own  men,  nor  between  the  plain- 
tiff and  his  customers,  nor  between  the  men  they  respectively 
employed.  The  defendants  called  no  witnesses,  and  there 
was  no  evidence  to  justify  or  excuse  the  conduct  of  the  defend- 
ants. That  they  acted  as  they  did  in  furtherance  of  what 
they  considered  the  interests  of  union  men  may  probably  be 
fairly  assumed  in  their  favour,  although  they  did  not  come 
forward  and  say  so  themselves ;  but  that  is  all  that  can  be  said 
for  them.     No  one  can,  I  think,  say  that  the  verdict  was  not 


382    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

amply  warranted  by  the  evidence.  I  have  purposely  said 
nothing  about  the  black  list,  as  the  learned  judge  w^ho  tried 
the  case  considered  that  the  evidence  did  not  connect  the 
appellant  with  that  list.  But  the  black  list  was,  in  my  opin- 
ion, a  very  important  feature  in  the  case. 

3.  The  remaining  question  is  whether  such  conduct  in- 
fringed the  plaintiff's  rights  so  as  to  give  him  a  cause  of  action. 
In  my  opinion,  it  plainly  did.  The  defendants  were  doing  a 
great  deal  more  than  exercising  their  own  rights:  they  were 
dictating  to  the  plaintiff  and  his  customers  and  servants  what 
they  were  to  do.  The  defendants  were  violating  their  duty  to 
the  plaintiff  and  his  customers  and  servants,  which  was  to 
leave  them  in  the  undisturbed  enjoyment  of  their  liberty  of 
action  as  already  explained.  What  is  the  legal  justification  or 
excuse  for  such  conduct?  None  is  alleged,  and  none  can  be 
found.  This  violation  of  duty  by  the  defendants  resulted  in 
damage  to  the  plaintiff — not  remote,  but  immediate  and  in- 
tended. The  intention  to  injure  the  plaintiff  negatives  all 
excuses  and  disposes  of  any  question  of  remoteness  of  damage. 
Your  Lordships  have  to  deal  with  a  case,  not  of  damnum  absque 
injuria,  but  of  damnum  cum  injuria. 

Every  element  necessary  to  give  a  cause  of  action  on  ordi- 
nary principles  of  law  is  present  in  this  case.  As  regards 
authorities,  they  were  all  exhaustively  examined  in  the  Mogul 
Steamship  Co.  v.  MacGregor  [[1892]  A.  C.  25.]  and  Allen  v. 
Flood,  and  it  is  unnecessary  to  dwell  upon  them  again.  I 
have  examined  all  those  which  are  important,  and  I  venture 
to  say  that  there  is  not  a  single  decision  anterior  to  AUen  v. 
Flood,  in  favour  of  the  appellant.  His  sheet-anchor  is  Allen 
v.  Flood,  which  is  far  from  covering  this  case,  and  which  can 
only  be  made  to  cover  it  by  greatly  extending  its  operation. 

It  was  contended  at  the  bar  that  if  what  was  done  in  this 
case  had  been  done  by  one  person  only,  his  conduct  would  not 
have  been  actionable,  and  that  the  fact  that  what  was  done 
was  effected  by  many  acting  in  concert  makes  no  difference. 
My  Lords,  one  man  without  others  behind  him  who  would 
obey  his  orders  could  not  have  done  what  these  defendants 
did.  One  man  exercising  the  same  control  over  others  as  these 
defendants  had  could  have  acted  as  they  did,  and  if  he  had 
done  so,  I  conceive  that  he  would  have  committed  a  wrong 


THE  COMMON  LAW  383 

towards  the  plaintiff  for  which  the  plaintiff  could  have  main- 
tained an  action.  I  am  aware  that  in  Allen  v.  Flood,  Lord 
Hersciiell  [[1898]  A.  C.  at  pp.  128,  138.]  expressed  his  opin- 
ion to  he  that  it  was  immaterial  whether  Allen  said  he  would 
call  the  men  out  or  not.  This  may  have  been  so  in  that  par- 
ticular case,  as  there  was  evidence  that  Allen  had  no  power 
to  -^all  out  the  men,  and  the  men  had  determined  to  strike 
before  Allen  had  anything  to  do  with  the  matter.  But  if 
Lord  Herschell  meant  to  say  that  as  a  matter  of  law  there  is 
no  difference  between  giving  information  that  men  will  strike 
and  making  them  strike,  or  threatening  to  make  them  strike, 
by  calling  them  out  when  they  do  not  want  to  strike,  I  am 
unable  to  concur  with  him.  It  is  all  very  well  to  talk  about 
peaceable  persuasion.  It  may  be  that  in  Allen  v.  Flood,  there 
was  nothing  more ;  but  here  there  was  very  much  more.  What 
may  begin  as  peaceable  persuasion  may  easily  become,  and  in 
trades  union  disputes  generally  does  become,  peremptory  or- 
dering, with  threats  open  or  covert  of  very  unpleasant  conse- 
quences to  those  who  are  not  persuaded.  Calling  workmen 
out  involves  very  serious  consequences  to  such  of  them  as  do 
not  obey.  Black  lists  are  real  instruments  of  coercion,  as 
every  man  whose  name  is  on  one  soon  discovers  to  his  cost. 
A  combination  not  to  work  is  one  thing,  and  is  lawful.  A 
combination  to  prevent  others  from  working  by  annoying 
them  if  they  do  is  a  very  different  thing,  and  is  prima  facie 
unlawful.  Again,  not  to  work  oneself  is  lawful  so  long  as  one 
keeps  off  the  poor-rates,  but  to  order  men  not  to  work  when 
they  are  willing  to  work  is  another  thing.  A  threat  to  call 
men  out  given  by  a  trade  union  official  to  an  employer  of  men 
belonging  to  the  union  and  willing  to  work  with  him  is  a  form 
of  coercion,  intimidation,  molestation,  or  annoyance  to  them 
and  to  him  very  difficult  to  resist,  and,  to  say  the  least,  re- 
quiring justification.     None  was  offered  in  this  case. 

My  Lords,  it  is  said  that  conduct  which  is  not  actionable  on 
the  part  of  one  person  cannot  be  actionable  if  it  is  that  of 
several  acting  in  concert.  This  may  be  so  where  many  do  no 
more  than  one  is  supposed  to  do.  But  numbers  may  annoy 
and  coerce  where  one  may  not.  Annoyance  and  coercion  by 
many  may  be  so  intolerable  as  to  become  actionable,  and  pro- 
duce a  result  which  one  alone  could  not  produce.    I  am  aware 


384    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  the  difficulties  which  surround  the  law  of  conspiracy  both 
in  its  criminal  and  civil  aspects ;  and  older  views  have  been 
greatly  and,  if  I  may  say  so,  most  beneficially  modified  by  the 
discussions  and  decisions  in  America  and  this  country. 
Amongst  the  American  cases  I  would  refer  especially  to  Vege- 
lahn  V.  Guntner  [167  Mass.  92.],  where  coercion  by  other 
means  than  violence,  or  threats  of  it,  was  held  unlawful.  -In 
this  country  it  is  now  settled  by  the  decision  of  this  House  in 
the  case  of  the  Mogul  Steamship  Co.  [  [1892]  A.  C.  25;  23  Q. 
B.  D.  598.]  that  no  action  for  a  conspiracy  lies  against  persons 
who  act  in  concert  to  damage  another  and  do  damage  him, 
but  who  at  the  same  time  merely  exercise  their  own  rights  and 
who  infringe  no  rights  of  other  people.  Allen  v.  Flood,  em- 
phasises the  same  doctrine.  The  principle  was  strikingly  illus- 
trated in  the  Scottish  Co-operative  Society  v.  Glasgow  Flesh- 
ers'  Association  [35  Sc.  L.  R.  645.],  which  was  referred  to  in 
the  course  of  the  argument.  In  this  case  some  butchers  in- 
duced some  salesmen  not  to  sell  meat  to  the  plaintiffs.  The 
means  employed  were  to  threaten  the  salesmen  that  if  they 
continued  to  sell  meat  to  the  plaintiffs  they,  the  butchers, 
Avould  not  buy  from  the  salesmen.  There  was  nothing  unlaw- 
ful in  this,  and  the  learned  judge  held  that  the  plaintiffs 
shewed  no  cause  of  action,  although  the  butchers'  object  was 
to  prevent  the  plaintiffs  from  buying  for  co-operative  societies 
in  competition  with  themselves,  and  the  defendants  were  act- 
ing in  concert. 

The  cardinal  point  of  distinction  between  such  cases  and 
the  present  is  that  in  them,  although  damage  was  intentionally 
inflicted  on  the  plaintiffs,  no  one's  right  was  infringed — no 
wrongful  act  was  committed;  whilst  in  the  present  case  the 
coercion  of  the  plaintiff's  customers  and  servants,  and  of  the 
plaintiff  through  them,  was  an  infringement  of  their  liberty 
as  well  as  his,  and  was  wrongful  both  to  them  and  also  to  him, 
as  I  have  already  endeavoured  to  shew. 

Intentional  damage  which  arises  from  the  mere  exercise  of 
the  rights  of  many  is  not,  I  apprehend,  actionable  by  our  law 
as  now  settled.  To  hold  the  contrary  would  be  unduly  to 
restrict  the  liberty  of  one  set  of  persons  in  order  to  uphold  the 
liberty  of  another  set.  According  to  our  law,  competition,  with 
all  its  drawbacks,  not  only  between  individuals,  but  between 


THE  COMMON  LAW  386 

associations,  and  between  them  and  individuals,  is  permissible, 
provided  nobody's  rights  are  infringed.  The  law  is  the  same 
for  all  persons,  whatever  their  callings;  it  applies  to  masters 
as  well  as  to  men ;  the  proviso,  however,  is  all-important,  and 
it  also  applies  to  both,  and  limits  the  rights  of  those  who  com- 
bine to  lock-out  as  well  as  the  rights  of  those  who  strike,  liut 
coercion  by  threats,  open  or  disguised,  not  only  of  bodily  harm 
but  of  serious  annoyance  and  damage,  is  prima  facie,  at  all 
events,  a  wrong  inflicted  on  the  persons  coerced ;  and  in  con- 
sidering whether  coercion  has  been  applied  or  not,  numbers 
cannot  be  disregarded. 

My  Lords,  the  appellant  relied  on  several  authorities  be- 
sides those  already  referred  to,  which  I  Avill  shortly  notice. 
No  coercion  of  the  plaintiff's  employer,  customers,  servants, 
or  friends  had  to  be  considered  in  Kearney  v.  Lloyd.  [2G  L. 
R.  Ir.  268.]  This  is  fully  shewn  in  the  various  judgments  now 
under  review. 

In  Huttley  v.  Simmons  [[1898]  1  Q.  B.  181.]  the  plaintiff 
was  a  cab-driver  in  the  employ  of  a  cab-owner.  The  defend- 
ants were  four  members  of  a  trade  union  who  were  alleged 
to  have  maliciously  induced  the  cab-owner  not  to  employ  the 
plaintiff,  and  not  to  let  him  have  a  cab  to  drive.  The  report 
does  not  state  the  means  employed  to  induce  the  cab-owner  to 
refuse  to  have  any  dealings  with  the  plaintiff.  The  learned 
judge  who  tried  the  case  held  that  as  to  three  of  the  defend- 
ants the  plaintiff  had  no  case,  and  that  as  to  the  fourth,  against 
whom  the  jury  found  a  verdict,  no  action  would  lie  because 
he  had  done  nothing  in  itself  wrong,  apart  from  motive,  and 
that  the  fact  that  he  acted  in  concert  with  others  made  no 
difference.  It  is  difficult  to  draw  any  satisfactory  conclusion 
from  this  case,  as  the  most  material  facts  are  not  stated. 

I  conclude  this  part  of  the  case  by  saying  that,  in  my  opin- 
ion, the  direction  given  to  the  jury  by  the  learned  judge  who 
tried  the  case  was  correct,  so  far  as  the  liability  of  the  defend- 
ants turns  on  principles  of  common  laAv,  and  that  the  objec- 
tion taken  to  it  by  the  counsel  for  the  appellant  is  untenable. 
I  mean  the  objection  that  the  learned  judge  did  not  distinguish 
between  coercion  to  break  contracts  of  service,  and  coercion 
to  break  contracts  of  other  kinds,  and  coercion  not  to  enter 
into  contracts. 

Kales  R.  of  T.  Vol.  1—25 


386    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

I  pass  now  to  consider  the  effect  of  the  statute  38  &  39  Vict, 
c.  86.  This  Act  clearly  recognises  the  legality  of  strikes  and 
lock-outs  up  to  a  certain  point.  It  is  plainly  legal  now  for 
workmen  to  combine  not  to  work  except  on  their  own  terms. 
On  the  other  hand,  it  is  clearly  illegal  for  them  or  any  one 
else  to  use  force  or  threats  of  violence  to  prevent  other  people 
from  working  on  any  terms  which  they  think  proper.  But 
there  are  many  ways  short  of  violence,  or  the  threat  of  it,  of 
compelling  persons  to  act  in  a  way  which  they  do  not  like. 
There  are  annoyances  of  all  sorts  and  degrees :  picketing  is  a 
distinct  annoyance,  and  if  damage  results  is  an  actionable 
nuisance  at  common  law,  but  if  confined  merely  to  obtaining 
or  communicating  information  it  is  rendered  lawful  by  the 
Act  (s.  7).  Is  a  combination  to  annoy  a  person's  customers, 
so  as  to  compel  them  to  leave  him  unless  he  obeys  the  com- 
bination, permitted  by  the  Act  or  not?  It  is  not  forbidden  by 
s.  7;  is  it  permitted  by  s.  3?  I  cannot  think  that  it  is.  The 
Court  of  Appeal  (of  which  I  was  a  member)  so  decided  in 
Lyons  v.  Wilkins  [[1896]  1  Ch.  811.],  in  the  case  of  Schoen- 
thal,  which  arose  there,  and  is  referred  to  in  the  judgment  of 
Walker  L.  J.  at  p.  99  of  the  printed  judgments  in  this  case. 
This  particular  point  liad  not  to  be  reconsidered  when  Lyons 
V.  Wilkins  [[1896]  1  Ch.  811.]  came  before  the  Court  of 
Appeal  after  the  decision  in  Allen  v.  Flood.  [See  [1899]  1 
Ch.  255.]  But  Byrne,  J.,  modified  the  injunction  granted  on 
the  first  occasion  [See  [1899]  1  Ch.  at  pp.  258,  259.]  by  con- 
fining it  to  watching  and  besetting.  He  might  safely  have 
gone  further  and  have  restrained  the  use  of  other  unlawful 
means;  but  the  strike  was  then  over,  and  his  modification  was 
not  objected  to,  and  cannot  be  regarded  as  an  authority  in 
favour  of  the  appellant's  contention. 

It  must  be  conceded  that  if  what  the  defendants  here  did 
had  been  done  by  one  person  it  would  not  have  been  punish- 
able as  a  crime.  I  cannot  myself  see  that  there  was  in  this 
case  any  trade  dispute  between  employers  and  workmen  within 
the  meaning  of  s.  3.  I  am  not  at  present  "prepared  to  say  that 
the  officers  of  a  trade  union  who  create  strife  by  calling  out 
members  of  the  union  working  for  an  employer  with  whom 
none  of  them  have  any  dispute  can  invoke  the  benefit  of  this 
section  even  on  an  indictment  for  a  conspiracy. 


THE  COMMON  LAW  387 

But  assuming  that  there  was  a  trade  dispute  within  the 
meaning  of  s.  3,  and  that  an  indictment  for  conspiracy  could 
not  be  sustained  in  a  case  like  this,  the  difference  between  an 
indictment  for  a  conspiracy  and  an  action  for  damages  occa- 
sioned by  a  conspiracy  is  very  marked  and  is  well  known.  An 
illegal  agreement,  whether  canned  out  or  not,  is  the  essential 
element  in  a  criminal  case ;  the  damage  done  by  several  per- 
sons acting  in  concert,  and  not  the  criminal  conspiracy,  is  the 
important  element  in  the  action  for  damages.  [See  1  Wm. 
Saund.  229b,  230,  and  Barber  v.  Lesiter,  7  C.  B.  (N.  S.)  175.] 
In  my  opinion,  it  is  quite  clear  that  s.  3  has  no  application  to 
civil  actions:  it  is  confined  entirely  to  criminal  proceedings. 
Nor  can  I  agree  with  those  who  say  that  the  civil  liability  de- 
pends on  the  criminality,  ■  and  that  if  such  conduct  as  is  com- 
plained of  has  ceased  to  be  criminal  it  has  therefore  ceased  to 
be  actionable.  On  this  point  I  will  content  myself  by  saying 
that  I  agree  with  Andrews,  J.,  and  those  who  concurred  with 
him.  It  does  not  follow,  and  it  is  not  true,  that  annoyances 
which  are  not  indictable  are  not  actionable.  The  law  relating 
to  nuisances,  to  say  nothing  of  the  law  relating  to  combinations, 
shews  that  many  annoyances  are  actionable  which  are  not 
indictable,  and  the  principles  of  justice  on  which  this  is  held 
to  be  so  appear  to  me  to  apply  to  such  cases  as  these. 

My  Lords,  I  will  detain  your  Lordships  no  longer.  Allen  v. 
Flood,  is  in  many  respects  a  very  valuable  decision,  but  it  may 
be  easily  misunderstood  and  carried  too  far. 

Your  Lordships  are  asked  to  extend  it  and  to  destroy  that 
individual  liberty  which  our  laws  so  anxiously  guard.  The 
appellant  seeks  by  means  of  Allen  v.  Flood,  and  by  logical 
reasoning  based  upon  some  passages  in  the  judgments  given 
by  the  noble  Lords  who  decided  it,  to  drive  your  Lordships 
to  hold  that  boycotting  by  trades  unions  in  one  of  its  most 
objectionable  forms  is  lawful,  and  gives  no  cause  of  action 
to  its  victims  although  they  may  be  pecuniarily  ruined  thereby. 

My  Lords,  so  to  hold  would,  in  my  opinion,  be  contrary  to 
well-settled  principles  of  English  law,  and  would  be  to  do 
what  is  not  yet  authorized  by  any  statute  or  legal  decision. 

In  my  opinion  this  appeal  ought  to  be  dismissed  with  costs. 

Order  appealed  from  affirmed  and  appeal  dismissed  with  costs. 
Lords'  Journals,  August  5,  1901. 


388    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

THE  MASTER  STEVEDORES'  ASSN.  v.  WALSH 

(Court  of  Common  Pleas  for  the  City  and  County  of  New 
York,  1867.    2  Daly,  1.) 

This  was  a,  demurrer  to  the  complaint,  on  the  ground  that  it 
did  not  state  facts  sufficient  to  constitute  a  cause  of  action. 

The  plaintiffs  are  a  corporation  of  which  the  defendant  is 
a  member  and  is,  as  its  name  imports,  an  association  of  master 
stevedores.  The  association  adopted  a  by-law  or  "pledge"  to 
the  effect  that  there  should  be  no  variation  from  the  prices 
adopted  by  the  association,  and  that  if  any  member,  after  an 
investigation  by  a  committee,  should  be  found  guilty  of  work- 
ing for  less  than  the  prices  fixed,  he  should  forfeit  to  the  asso- 
ciation twenty-five  per  cent,  of  the  amount  of  such  bill  as 
fixed,  which  penalty  might  be  collected  in  the  name  of  the 
corporation  by  due  process  of  law. 

The  complaint  alleges  that  the  by-law  was  subscribed  to  by 
the  defendant,  that  the  corporation  had  fixed  the  rate  of  dis- 
charging railroad  iron  from  vessels  at  thirty-two  cents  a  ton, 
and  that  the  defendant  had  discharged  fifteen  hundred  tons 
in  violation  of  this  regulation ;  that  he  was  consequently  found 
guilty  by  the  association  of  working  for  less  than  the  recog- 
nized price,  and  incurred  a  penalty  of  $125,  for  the  recovery 
of  which  the  action  is  brought. 

DALY,  F,  J.  The  complaint  is  demurred  to  upon  the  ground 
that  no  action  lies  upon  the  facts  stated,  the  specific  objection 
raised  by  the  demurrer  being  that  the  by-law  is  illegal,  be- 
cause the  object  it  is  designed  to  effect  is  one  that  is  forbidden 
by  law,  and  that  no  action  can  consequently  be  maintained 
upon  it. 

It  is  declared  by  the  Rev.  Stat.  (vol.  1,  p.  691,  §§  8  and  9), 
that  it  shall  be  unlawful  for  two  or  more  persons  to  conspire 
to  commit  any  act  injurious  to  trade  or  commerce,  and  that 
the  persons  so  conspiring  shall  be  deemed  guilty  of  a  mis- 
demeanor. In  the  People  v.  Fisher  (14  Wend.  9),  it  was  held 
that  it  was  a  violation  of  this  statute  for  a  body  of  journeymen 
shoemakers  in  the  village  of  Geneva,  in  this  State,  to  enter 
into  an  association  for  the  purpose  of  preventing  any  shoe- 
maker in  the  village  from  working  below  certain  rates,  which 


THE  COIVBION  LAW  389 

object  the  association  sought  to  obtain  by  imposing  a  penalty 
of  ten  dollars  upon  any  shoemaker  in  the  village  who  worked 
for  less,  and  by  a  mutual  agreement  among  the  members  of 
the  association  that  they  would  not  work  for  any  master  shoe- 
maker who  should  employ  a  journeyman  who  infringed  their 
rules,  unless  the  joui'nejrman  so  infringing  paid  the  ten  dollars 
to  the  association,  and  which  object  was  carried  into  effect  by 
a  number  of  the  members  of  the  association  quitting  the  em- 
ployment of  a  master  shoemaker,  who  had  employed  a  journey- 
man at  rates  below  those  which  the  association  had  agreed 
upon. 

The  feature  which  distinguishes  this  case  from  the  one  under 
consideration  is,  that  coercive  measures  were  there  resorted 
to  to  compel  a  compliance,  not  only  on  the  part  of  master 
shoemakers,  but  of  journeymen  not  members  of  the  associa- 
tion, with  the  regulations  the  combination  had  established. 
This  was  undertaking  to  interfere  with  the  rights  of  others, 
and  it  has  frequently  been  held  that  combinations  to  prevent 
any  journeyman  from  working  below  certain  rates,  or  to  pre- 
vent master  workmen  from  employing  one  except  at  certain 
rates  are  unlawful,  and  that  the  parties  engaging  in  such  com- 
bination may  be  indicted  for  a  conspiracy.  (Case  of  the  Jour- 
neymen Cordwainers  of  the  City  of  New  York,  printed  by  J. 
Riley,  New  York,  1810.  Case  of  Journeymen  Cordwainers  of 
Pittsburg,  printed  at  Pittsburg,  1811.  Case  of  the  Philadelphia 
Boot  and  Shoemakers,  Yates'  Select  Cases,  144.  The  Philadel- 
phia Journeymen  Tailors'  Case,  Phil.  1827,  pp.  103,  160.  Peo- 
ple V.  Trequler,  1  Wheeler's  Criminal  Cases,  142.) 

In  the  present  case,  the  by-law  was  limited  in  its  operation 
to  the  members  composing  the  corporation,  and  is  sought  to 
be  enforced  against  one  who  had  voluntarily  subscribed  to  it. 
In  this  respect  it  is  distinguished  from  the  case  of  The  People 
V.  Fisher,  and  from  the  other  cases  above  cited ;  but  if  all  the 
reasons  which  Chief  Justice  Savage  assigned  for  the  judg- 
ment of  the  Court,  in  The  People  v.  Fisher,  are  to  be  received 
as  law,  they  would  apply  to  this  case. 

They  are  substantially  as  follows:  That  any  confederacy 
or  upited  agreement  among  journeymen,  for  the  purpose  of 
raising  their  wages,  is  an  indictable  offense  at  the  common  law ; 
that  journeymen  may  each,  singly,  refuse  to  work  unless  they 


390    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

receive  an  advance  of  wages,  but  if  they  do  so  by  preconcert 
or  association,  they  may  be  punished  for  a  conspiracy;  that 
if  the  journeymen  bootmakers  of  the  village  of  Geneva,  by 
extravagant  demands  enhance  the  price  of  labor  at  that  place, 
boots  made  elsewhere  may  be  sold  cheaper,  and  it  is,  therefore 
an  act  injurious  to  trade,  so  far  as  respects  the  trade  of  vil- 
lage of  Geneva  in  that  particular  article,  which  is  all  that  is 
necessary  to  bring  the  offense  within  the  statute ;  that  the 
best  interests  of  society  require  that  the  price  of  labor  be  left 
to  regulate  itself,  or  be  limited  by  the  demand  of  it;  that  a 
combination  or  confederacy  to  enhance  or  reduce  the  price 
of  it,  or  of  any  article  of  trade  or  commerce,  is  injurious ;  that 
without  officious  and  improper  interference,  the  price  of  labor 
will  be  regulated  by  the  demand  for  it,  but  the  right  does  not 
exist  to  enhance  it  by  any  fixed  artificial  means;  that  a  me- 
chanic is  not  obliged  by  law  to  work  for  any  particular  price. 
He  has  a  right  to  say  that  he  will  not  make  a  boot  for  less  than 
a  certain  price,  but  he  has  no  right  to  say  that  no  other  boot- 
maker shall  make  one  for  less.  If  one  individual  does  not 
possess  such  a  right  over  the  conduct  of  another,  no  number 
of  individuals  can  possess  it.  All  combinations,  therefore,  to 
effect  such  an  object  are  injurious,  not  only  to  the  particular 
individual  opposed,  but  to  the  public  at  large.  That  if  jour- 
neymen boot-makers  may  say  what  boots  shall  be  made  for,  it 
would  be  optional  with  them  to  say  $10  or  $50  shall  be  paid, 
whieh  would  be  a  monopoly  of  the  most  odious  kind;  that  if 
journeymen  can  in  this  way  fix  their  own  wages,  they  would 
have  the  power  to  regulate  the  price  of  any  manufactured 
article,  and  the  community  might  be  enormously  taxed;  that 
if  the  journeymen  bakers  should  refuse  to  work  except  for 
enormous  wages,  and  should  compel  all  the  journeymen  bakers 
in  a  city  to  stop  work,  the  community  would  be  without  bread. 
Such  combinations  would  be  productive  of  derangement  and 
confusion,  and  if  generally  entered  into  would  be  prejudicial 
to  trade  and  to  the  public  interest;  the  truth  being  that  they 
are  wrong  in  every  instance,  as  industry  requires  no  such  means 
to  support  it,  competition  being  the  life  of  trade. 

Much  of  what  is  here  said  is  undoubtedly  right,  and  it  is 
forcibly  put.  Many  of  the  reasons  were  applicable  to  the 
case  before  the  court,  which  was  correctly  determined  in  ac- 


THE  COMMON  LAW  391 

cordance  with  the  adjudged  cases.  The  objection,  however, 
is,  that  some  of  the  propositions  stated  are  not  tenable,  and 
that  there  is  an  omission  throughout,  to  distinguish  between 
what  is  entirely  lawful  for  either  journeymen  or  master  work- 
men to  do  in  their  collective  capacity,  upon  the  subject  of 
wages,  and  those  unlawful  combinations  where  the  object  is 
to  control  the  rate  of  wages  by  the  use  of  coercive  measures. 
It  is  not,  nor  has  it  ever  been,  a  rule  of  the  common  law  that 
any  mutual  agreement  among  journeymen  for  the  purpose  of 
raising  their  wages,  is  an  indictable  offense,  or  that  they  are 
guilty  of  a  conspiracy  if,  by  preconcert  and  arrangement,  they 
refuse  to  work  unless  they  receive  an  advance  of  wages.  The 
Chief  Justice  admitted  that  he  had  found  but  few  adjudica- 
tions upon  the  subject,  and  that  the  offense  of  conspiracy  had 
been  left  in  greater  uncertainty  by  the  common  law  than  most 
offenses.  He  remarked  that  precedents  in  the  absence  of 
adjudications  were  some  evidence  of  what  the  law  is,  and  he 
referred  to  several,  but  none  of  them  warrant  the  conclusion 
that  they  were  founded  upon  any  rule  of  the  common  law. 
He  referred  to  but  two  adjudged  cases:  The  King  v.  The 
Journeymen  Tailors  of  Cambridge,  8  Modern,  11,  and  The 
Tub  Women  v.  The  Brewers  of  London,  the  last  of  which  cases, 
he  says,  has  been  cited  as  sound  law  by  all  subsequent  criminal 
writers.  There  is  no  report  of  any  case  under  such  a  name  of 
The  Tub  Women  v.  The  Brewers  of  London,  It  is  merely 
mentioned  by  name  in  the  case  first  above  cited,  as  authority 
for  the  proposition  that  a  conspiracy  of  any  kind  is  illegal', 
though  the  matter  about  which  the  parties  conspired  might 
have  been  lawful  for  them,  or  any  of  them,  to  do,  if  they  had 
not  conspired  to  do  it.  The  first  volume  of  the  Modern  Re- 
ports, in  which  this  reference  is  found,  is  one  of  the  least 
reliable  of  the  English  reports,  being  full  of  inaccuracies, 
blunders,  and  misstatements.  Burrows,  in  his  reports,  speaks 
of  it  as  "a  miserable,  bad  book,"  and  says,  that  upon  being 
cited,  the  Court  of  King's  Bench  treated  it  with  the  contempt 
that  it  deserved  (1  Burr.  386;  3  id.,  1326) ;  and  by  an  excellent 
authority  upon  the  books  of  reports  and  their  reporters,  it  is 
characterized  by  the  epithet  of  execrable  (Wallace's  Common 
Law  Reporters,  3  ed.  p.  226).  The  title  "The  Tub  Women  v. 
The  Brewers  of  London,"  is  undoubtedly  a  mistake,  and  it 


392    COAIBINATIONS  AND  RESTRAINT  OF  TRADE 

has  been  conjectured  that  the  case  referred  to  is  The  King  v. 
Sterling  and  others,  reported  in  1  Lev.  125 ;  1  Sid.  274 ;  1  Keb. 
350.  (See  the  conjectures  of  Mr.  Emmett  and  of  Mr.  Samp- 
son respecting  it,  in  Yates'  Select  Cases,  pp.  164,  211,  212).  I 
entertain  no  doubt  but  that  this  conjecture  is  correct,  and  a 
brief  statement  of  that  case  will  suffice  to  show  what  was  de- 
termined by  it.  The  defendants — brewers  of  Loudon — were 
found  guilty  of  a  conspiracy,  for  agreeing  that  they  would 
brew  no  small  beer — which  was  the  drink  of  the  poor — for  a 
certain  length  of  time,  nor  ale,  except  at  a  certain  price,  with 
the  intent  of  moving  the  common  people  to  pull  down  the 
excise-house  and  to  bring  the  excisemen  into  public  odium, 
that  they  might  be  impoverished  and  disabled  from  paying 
their  rent  to  the  government,  to  the  diminution  of  the  revenue ; 
which  was  a  very  clear  case  of  conspiracy,  the  design  being  to 
impair  the  public  revenue,  to  inflict  pecuniary  injury  upon  all 
the  excisemen,  and  to  stir  up  a  public  tumult.  Assuming  it  to 
be,  as  I  have  no  doubt  it  is,  the  case  referred  to  under  the  sup- 
posititious title  of  the  "The  Tub  Women  v.  Brewers  of  Lon- 
don," it  would  have  been  more  correct  to  have  said  that  it  war- 
rants the  conclusion  that  though  the  brewers,  or  any  of  them, 
had  the  right  to  cease  brewing,  or  to  raise  the  price  of  their  ale, 
it  was  unlawful  for  them  to  combine  to  do  so  for  such  an  object 
as  the  one  above  stated.  The  case  is  an  authority  simply  for 
a  familiar  principle  of  the  criminal  law,  that  it  is  a  conspiracy 
to  combine  to  do  a  lawful  act  for  an  iinlawful  purpose,  or  by 
unlawful  means. 

As  respects  the  remaining  case  (The  King  v.  The  Journey- 
men Tailors  of  Cambridge),  it  is  also  found  in  this  discredited 
volume  of  reports,  in  further  condemnation  of  which  I  may  cite 
the  remark  of  an  eminent  English  judge,  Justice  Wilmot, 
that,  "nine  cases  out  of  ten  in  this  book  are  totally  mistaken" 
(The  King  v.  Harris,  7  Term  R.  238).  But  even  the  case,  as 
reported  there,  affords  no  ground  for  the  inference  that  there 
was  any  such  rule  at  the  common  law  as  Chief  Justice  Savage 
supposed.  In  1721,  when  the  case  was  decided,  there  were 
acts  of  Parliament  regulating  the  rate  of  wages.  The  defend- 
ants, according  to  the  report,  were  indicted  for  refusing  to 
work  unless  they  received  higher  rates  than  the  statute  al- 
lowed.    And,  as  far  as  can  be  gathered  from  the  confused 


THE  COMMON  LAW  393 

statement  of  the  reporter,  the  conviction  was  held  to  be  good, 
because  they  had  conspired  to  raise  their  wages  beyond  what 
the  law  permitted.  These  early  English  statutes,  regulating 
the  price  of  labor,  being  wholly  inapplicable  to  us  in  our 
colonial  condition,  were  never  in  force  in  this  country,  and 
formed  no  part  of  the  law  of  the  Colony  of  New  York,  at  the 
adoption  of  our  State  Constitution  in  1777.  This  decision, 
therefore,  was  limited  to  England,  deriving  its  whole  effect 
from  the  English  statute,  the  provisions  of  which  it  was  held 
the  defendants  had  conspired  to  defeat. 

Chief  Justice  Gibson  declared,  in  1821,  that  it  had  never 
been  decided  in  England  that  it  was  unlawful  for  journeymen 
to  agree  that  they  would  not  work,  except  for  certain  wages, 
or  for  master  workmen  to  agree  that  they  would  not  employ 
any  journeymen,  except  at  certain  rates  (Commonwealth  v. 
Carlisle,  1  Hall's  Journal  of  Jurisprudence  for  1822,  p.  225). 
And  in  corroboration  of  the  statement  of  this  very  accurate 
and  eminent  jurist,  I  would  add  that  I  have  examined  down 
to  the  present  time,  and  have  found  no  case,  either  in  this 
country  or  in  England,  in  which  any  such  decision  has  been 
rendered.  In  some  of  the  elementary  writers  there  are  pas- 
sages giving  countenance  to  such  a  doctrine,  and  there  are 
some  observations  of  judges  to  the  same  effect.  Justice  Gross 
said,  in  The  King  v.  Mawrey,  6  Term  R.  636,  that  in  many 
cases  an  agreement  to  do  a  certain  thing  has  been  considered 
the  subject  of  indictment  for  a  conspiracy,  though  the  same 
act,  if  done  separately  by  each  individual,  without  any  agree- 
ment among  themselves  would  not  have  been  illegal;  as  in 
the  case  of  journeymen  conspiring  to  raise  their  wages,  each 
may  insist  upon  raising  his  wages  if  he  can,  but  if  several 
meet  for  the  same  purpose,  it  is  illegal,  and  the  parties  may 
be  indicted  for  a  conspiracy.  But  this  was  put  simply  by  way 
of  illustration,  as  there  was  no  such  question  in  the  case,  and 
was  evidently  made  without  examination,  as  no  authorities 
are  referred  to ;  and  in  the  case  of  the  Philadelphia  Boot  and 
Shoemakers,  Yates'  Select  Cases,  144,  and  in  the  case  of  the 
Philadelphia  Journeymen  Tailors,  Phil.,  1827,  pp.  103,  160, 
Recorder  Levy  said  that  a  single  journeyman  may  refuse  to 
work,  but  many  journeymen  jointly  must  not ;  but  there  the 
object  of  the  combination  was  to  coerce  employers  as  well  as 


394    COIMBINATIONS  AND  RESTRAINT  OF  TRADE 

third  persons,  and  the  point  was  not  necessarily  involved.  In 
the  New  York  Cordwainers'  Case,  supra,  on  the  contrary, 
after  an  elaborate  argument  of  the  question,  the  court  declared 
that  they  would  not  say  that  an  agreement  not  to  work  except 
for  certain  wages  would  amount  to  a  conspiracy,  without  un- 
lawful means  were  resorted  to  to  enforce  it.  This  case  was 
tried  in  this  city  in  1809.  Justice  Radcliffe,  an  eminent 
Judge  of  the  Supreme  Court,  was  on  the  bench,  having  asso- 
ciated with  him  another  distinguished  judge,  Josiah  0.  Hoff- 
man, and  their  united  opinion  upon  such  a  question,  after  it 
had  been  learnedly  discussed  before  them  by  four  of  the  ablest 
counsel  then  in  this  State — Emmet,  Colden,  Griffin,  and  Samp- 
son— is  entitled  to  more  consideration  than  the  opinion,  ex- 
pressed by  way  of  illustration,  by  Justice  Gross,  or  the  pass- 
ing observation  of  Recorder  Levy. 

In  the  case  of  the  Philadelphia  Journeymen  Tailors,  printed 
at  Philadelphia,  1827,  Recorder  Reed,  upon  a  full  examina- 
tion of  the  subject,  and  after  reviewing  the  opinion  of  his 
predecessor.  Recorder  Levy,  held  that  an  agreement  among 
journeymen  not  to  work  unless  they  received  certain  wages, 
where  it  did  not  extend  beyond  themselves,  and  where  no  other 
means  were  used,  was  not  illegal,  though  it  would  be,  if  the 
object  was  to  operate  upon  others  not  voluntarily  entering 
into  the  agreement.  Journeymen,  he  said,  have  an  undoubted 
right,  by  an  agreement  among  themselves,  to  regulate  their 
own  conduct,  to  ask  as  much  as  they  please  for  their  services; 
but  the  moment  they  undertake  to  interfere  with  the  rights  of 
others,  or  enter  into  combinations  for  such  a  purpose,  the  act 
is  criminal  and  they  become  conspirators. 

In  the  Commonwealth  v.  Hunt  (4  Mete.  Ill),  Chief  Jus- 
tice Shaw  considered  this  question,  and  laid  down  the  broad 
proposition  that  men  are  free  to  work  for  whom  they  please, 
or  not  to  work  if  they  so  prefer,  and  that  it  is  not  criminal  for 
them  to  agree  together  to  exercise  this  right  in  such  a  manner 
as  may  best  subserve  their  own  interest ;  and  in  the  case  of  the 
Hartford  Carpet  Weavers,  tried  before  the  Superior  Court  in 
Connecticut,  in  1836,  printed  at  Hartford,  1836,  Chief  Justice 
"Williams  told  the  jury  that  if  the  real  nature  of  the  agree- 
ment between  the  defendants  was  an  agreement  not  to  work 
below  certain  prices,  that  that  was  not  an  indictable  offense, 


THE  COIMMON  LAW  395 

nor  the  subject  of  a  civil  action ;  that  it  had  been  so  deter- 
mined in  that  court,  and  under  this  ruling,  the  defendants 
were  acquitted.  This  case  is  entitled  to  great  weight.  It  was 
the  third  trial.  A  great  deal  of  time  was  given  to  it,  more 
than  seventy  witnesses  having  been  examined.  It  was  elabo- 
rately argued  by  counsel,  and  the  ruling  of  the  Chief  Justice 
was  made  after  the  case  had  been  considered  upon  appeal. 

The  absence  of  any  adjudication  upon  this  question  at  the 
common  law  may  be  attributable  to  the  fact  that  there  were 
statutes  in  England,  from  the  passage  of  the  Laborers'  Act 
in  the  reign  of  Edward  III.,  down  to  the  reign  of  George  IV., 
regulating  the  rate  of  wages,  and  forbidding  agreements  or 
combinations  to  evade  these  statutes ;  laws  made  in  the  inter- 
est of  employers,  in  the  creation  of  which  those  who  were  most 
affected  by  them  had  no  share.  By  the  Act  of  5  Geo.  IV,  c.  95, 
all  these  statutes  were  repealed,  and  as  this  important  statute 
was  prepared  with  great  care,  its  provisions  may  be  appro- 
priately referred  to,  both  as  indicating  the  state  of  common 
law,  and  as  furnishing  a  good  exposition  of  what  the  law 
ought  to  be  upon  this  subject.  It  prohibits  all  persons  from 
attempting  by  threats,  intimidation,  or  violence,  to  force  any 
workman  to  quit  his  employment,  or  to  prevent  him  from 
hiring  himself  to,  or  accepting  work  from  any  person,  or  for 
the  purpose  of  compelling  him  to  join  any  club  or  association, 
or  to  contribute  to  any  common  fund,  or  to  pay  any  fine  or 
penalty  for  not  doing  so,  or  for  refusing  to  comply  with  any 
regulations  made  to  obtain  an  advance,  or  to  reduce  the  rate 
of  wages,  or  to  lessen  the  hours  of  labor,  or  the  quantity  of 
work;  but  the  act,  at  the  same  time,  declares  that  it  shall  be 
lawful  for  any  persons  to  meet  together,  for  the  sole  purpose 
of  consulting  upon  or  determining  the  rate  of  wages,  which 
the  persons  so  assembling  shall  require  or  demand,  or  the 
hours  or  time  they  will  work  in  their  respective  employments, 
and  that  they  may  enter  into  any  agreements,  verbal  or  writ- 
ten, among  themselves,  for  the  purpose  of  fixing  the  rate  of 
wages  which  the  parties  so  agreeing  may  demand,  and  that  the 
persons  so  uniting  and  agreeing  shall  not  be  liable  to  any 
prosecution  or  penalty  for  so  doing. 

The  distinction  which  this  statute  makes  between  the  legality 
of  association  among  workmen  for  the  protection  of  their  in- 


396    COMBINATIONS  AI^JD  RESTRAINT  OF  TRADE 

terest,  by  agreeing  as  a  body  not  to  work  below  certain  prices, 
and  an  illegal  combination  formed  for  the  purpose  of  making 
it  compulsory  upon  all  the  journeymen  in  a  particular  branch 
of  business,  and  upon  the  employers  to  conform  to  certain 
prices  by  imposing  penalties  upon  the  journeymen  in  a  city 
or  town  who  refuse  to  do  so,  or  by  agreeing  as  a  body  not  to 
work  for  any  employer  who  will  employ  such  a  journeyman, 
or  one  who  will  not  pay  the  penalty  or  become  a  member  of 
the  combination,  or  which  seeks  to  accomplish  such  a  purpose 
by  violence,  intimidation,  or  other  unlawful  means,  is  one 
that  has  been  slowly  arrived  at  in  England,  and  toward  which 
the  courts  in  this  country  have  been  gradually  approximating, 
for  the  reason  that  it  has  its  foundation  in  the  plainest  prin- 
ciples of  justice.  The  apprehension  that  if  this  be  conceded, 
it  would  place  employers  wholly  at  the  mercy  of  their  work- 
men, who  would  have  it  in  their  power  to  exact  any  sum  for 
their  services,  however  extravagant,  is  altogether  an  imaginary 
one.  It  is  not  possible,  by  any  organization  among  journey- 
men, to  bring  about  such  a  result.  The  history  of  English 
legislation  upon  the  subject  of  wages,  and  of  the  operations  of 
trades-unions,  show  that  it  is  neither  in  the  power  of  pro- 
hibitory laws  nor  of  artificial  combinations  to  control  arbi- 
trarily the  price  of  labor,  and  that  no  combination  can  devise 
any  general  regulation  or  scheme  that  will  bring  to  the  same 
level  the  skillful  and  the  incompetent,  the  diligent  and  the 
idle.  All  such  matters  regulate  themselves.  If  labor  is  in 
demand,  the  rate  of  compensation  will  be  enhanced  in  propor- 
tion; and  if  it  is  not,  no  combination  among  workmen  can 
prevent  the  falling  of  prices.  Voluntary  associations  among 
workmen,  or  agreements  among  them  not  to  work  except  for 
certain  prices,  are  effectual  only  when  their  demands  are  just 
and  reasonable,  and  when  they  attempt  anything  more,  they 
not  only  fail  of  their  object,  but  are  themselves  the  chief 
sufferers.  Workmen  in  every  branch  or  calling  are  too  uni- 
versally diffused,  too  dependent  upon  their  necessities,  and 
too  diverse  in  their  interests,  to  make  it  possible  by  organiza- 
tion to  accomplish  anything  beyond  this,  for  if  those  in  any 
one  place  ask  what  is  exceptionable  or  unreasonable,  by  the 
natural  law  of  demand  and  supply,  others  will  come  in  and 
take  their  places. 


THE  COMMON  LAW  397 

But  it  may  be  in  their  power  to  secure  by  associated  effort 
what  it  would  not  be  possible  for  any  one  of  them  to  accom- 
plish alone;  and  that  they  should  have  the  right  to  associate 
together  for  the  mutual  protection  of  their  individual  interest 
is  so  plain,  that  it  is  singular  that  it  should  ever  have  been 
questioned.  Journeymen  may  be  as  well  acquainted  as  their 
employers  with  the  causes  which  affect  the  price  of  labor, 
and  in  this  country  are  generally  well  informed  in  such  mat- 
ters. They  may  be  quite  as  well  able  to  judge  whether  the 
ordinary  profits  of  employers  justify  a  reduction  or  an  in- 
crease in  the  rate  of  wages.  Why,  then,  should  they  not  have 
the  right  to  come  together  to  consider  the  condition  of  the 
branch  of  industry  in  which  they  are  operatives,  to  impart 
information  to  each  other,  to  exchange  their  views,  and  discuss 
in  a  body  a  matter  in  which  they  are  so  deeply  interested? 
Merchants  meet  daily  upon  'Change,  that  they  may  be  thor- 
oughly informed  upon  all  matters  relating  to  the  traffic  in 
which  they  are  engaged;  and  why  should  not  journeymen  meet 
together  to  consider  and  act  upon  a  subject  so  important  to 
them  as  the  general  rate  of  wages.  The  exact  sum  which 
should  be  required  for  a  day's  wages  may  be  fluctuating  and 
uncertain,  through  the  operation  of  other  causes  than  those  of 
demand  and  supply,  such  as  the  instability  of  the  currency, 
by  which  the  value  of  the  paper  representative  of  a  dollar 
changes  as  the  circulating  medium  is  increased  or  diminished. 
These  are  matters  for  the  consideration  of  workmen  as  well  as 
all  other  causes  affecting  the  price  of  their  labor ;  and  if  they 
come  together,  and  as  the  result  of  their  deliberations  conclude 
that  a  certain  rate  would  be  just  and  reasonable,  and  that  they 
will  not  work  for  less,  it  would  be  the  height  of  injustice  to 
call  such  an  act  a  crime,  by  declaring  that  it  was,  in  the  lan- 
guage of  the  statute,  unlawfully  conspiring  to  commit  an  act 
injurious  to  trade  or  commerce,  for  which  each  of  them  may 
be  indicted  and  punished. 

It  is  better  for  the  law  to  leave  such  matters  to  the  action 
of  the  parties  interested — to  leave  master  workmen  or  journey- 
men free  to  form  what  associations  they  please  in  relation  to 
the  rate  of  compensation,  so  long  as  they  are  voluntary.  They 
mutually  act  upon  each  other.  If  the  workmen  demand  too 
much,  or  the  masters  offer  too  little,  such  a  state  of  things 


398    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

cannot  continue  long,  or  be  productive  of  any  serious  incon- 
venience to  the  community,  as  that  party  must  ultimately  give 
way  whose  pretensions  are  not  founded  in  reason  and  justice 
(Regina  v.  Harris,  1  Carr.  and  Marsh.  662).  It  is  otherwise, 
however,  where  organizations  are  formed  to  intimidate  em- 
ployei-s,  or  to  coerce  other  journeymen;  and  it  matters  little 
what  are  the  measures  adopted,  if  the  object  of  them  is  to 
interfere  with  the  rights  or  control  the  free  action  of  others. 
It  was  held,  under  the  English  statute  I  have  referred  to,  that 
it  did  not  authorize  workmen  to  combine  for  the  purpose  of 
dictating  to  a  master  whom  he  should  employ  (Rex.  v.  Ryker- 
dyke,  1  M.  and  Kobs,  179,)  ;  and  the  several  convictions  in 
this  country  have  been  in  cases  where  coercive  measures  were 
resorted  to,  either  to  prevent  master  workmen  from  employ- 
ing journeymen  except  at  certain  rates  or  to  intimidate  jour- 
neymen from  engaging  below  such  rates,  or  to  compel  them  to 
become  members  of  the  combinations.  Every  man  has  the 
right  to  fix  the  price  of  his  own  labor — to  work  for  whom  he 
pleases,  and  for  any  sum  he  thinks  proper ;  and  every  master 
workman  has  equally  the  right  to  determine  for  himself  whom 
he  will  employ,  and  what  wages  he  will  pay.  Any  attempt  by 
force,  threat,  intimidation,  or  other  coercive  means,  to  control 
a  man  in  the  fair  and  lawful  exercise  of  these  rights  is  there- 
fore an  act  of  oppression,  and  any  combination  for  such  a 
purpose  is  a  conspiracy. 

It  may,  therefore,  be  laid  down  as  the  result  of  this  examina- 
tion, that  it  is  lawful  for  any  number  of  journeymen  or  of  master 
workmen  to  agree,  on  the  one  part  that  they  will  not  work 
below  certain  rates,  or  on  the  other  that  they  will  not  pay 
above  certain  prices;  but  that  any  association  or  com- 
bination for  the  purpose  of  compelling  journeymen  or  em- 
ployers to  conform  to  any  rule,  regulation,  or  agreement  fixing 
the  rate  of  wages,  to  which  they  are  not  parties,  by  the 
imposition  of  penalties,  by  agreeing  to  quit  the  service  of  any 
employer  who  employs  a  journeyman  below  certain  rates,  un- 
'  less  the  journeyman  pays  the  penalty  imposed  by  the  com- 
bination, or  by  menaces,  threats,  or  intimidations,  violence, 
or  other  unlawful  means,  is  a  conspiracy  for  which  the  parties 
entering  into  it  may  be  indicted. 

The  act  under  which  the  defendants  are  incorporated  (Laws 


THE  COMMON  LAW  399 

of  New  York,  1863,  p.  494),  declares  the  object  of  the  corpora- 
tion to  be  "the  better  to  promote  the  business  and  interests 
of  the  several  members  of  the   association,"   and  a  general 
power  is  given  to  make  by-laws  not  inconsistent  with  the  pro- 
visions of  the  act  of  incorporation,  or  of  the  laws  of  the  State. 
There  was  nothing  in  the  by-law  inconsistent  with  the  act  of 
incorporation,  or  with  the  laws  of  the  State.     As  individuals, 
the  master  stevedores  might  collectively  enter  into  an  agree- 
ment not  to  work  under  certain  rates,  and  when  formed  into 
a  corporation,  they  could,  as  a  corporate  body,  make  a  by-law 
of  that  nature,  being  one,  in  the  language  of  the  statute,  "to 
promote  the  business  and  interest  of  the  association."    If  the 
by-law  is  one  which  it  is  in  the  power  of  the  corporation  to 
make,  it  has  the  power  also  to  attach  to  it  a  penalty  for  the 
purpose   of  enforcing  it.     All  who  become   members  of  the 
corporate  body  are  bound  by  it,  and  where  the  penalty  is 
incurred  an  action  may  be  brought  in  the  name  of  the  cor- 
poration to  recover  it   (The  Tobacco  Pipe  Makers  v.  "Wood- 
roffe,  7  Barn.  &  C.  838 ;  King  v.  Clerk,  1  Salk.  349 ;  Company 
of  Feltmakers  v.  Davis,  1  B.  &  P.  100;  Vinters'  Company  v. 
Passy,  1  Burr.  239,  250 ;  Guardians  of  Trinity  House  v.  Crispin, 
T.  Jones  R.  144;  Leathy  v.  Webster,  Sayre,  251;   Grant  on 
Corporations,  76,  78,  82,  86,  87).    The  proper  mode  of  enforc- 
ing a  by-law  is  by  a  pecuniary  penalty,  for  the  corporation 
cannot,  either  directly  or  indirectly,  impose  any  forfeiture  of 
goods,  or  of  stock  or  other  corporate  interests  for  the  breach 
of  it  (Matter  of  the  Long  Island  Railroad  Company,  19  Wend. 
37),   and  the  penalty  must  be   certain    (Leathy  v.   Webster, 
supra).    The  words  of  the  by-law  are,  that  the  party  shall  for- 
feit to  the  association  twenty-five  per  cent,  of  the  amount  of 
such  bill  as  fixed  by  the  association,  ichich  penalty  may  be  col- 
lected by  due  process  of  law.   Though  the  word  forfeit  is  used, 
this  is  not  a  forfeiture  (Grant  on  Corporations,  84,  85,  303), 
but  a  pecuniary  penalty,  and  it  is  sufficiently  certain. 

This  was  not  a  by-law  in  restraint  of  trade,  for  it  imposes  no 
restraint  upon  one  party  which  is  not  beneficial  to  the  others, 
and  is  not,  as  has  been  shown,  prejudicial  to  the  interests  of 
the  public  (Chappel  v.  Brockaway,  21  Wend.  157;  Lawrence 
V.  Kidder,  10  Barb.  641).  The  demurrer  must  be  overruled, 
with  costs. 


400    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

SNOW  V.  WHEELER 
(Supreme  Judicial  Court  of  Mass.,  1873.    113  Mass.  179.) 

BILL  IN  EQUITY  brought  by  William  A.  Snow  and  five 
others,  on  behalf  of  themselves  and  other  members  of  the 
North  Brookfield  Lodge,  No.  28,  of  the  order  of  the  Knights 
of  St.  Crispin,  against  Daniel  W.  Wheeler,  Cornelius  Duggan, 
and  the  People's  Savings  Bank  of  Worcester,  to  compel  the 
defendants  Wlieeler  and  Duggan  to  draw  an  order  upon  the 
defendant  bank  to  enable  the  plaintiffs  to  withdraw  from 
the  bank  a  deposit  made  by  Wheeler  and  Duggan,  in  their  names 
as  trustees,  but  acting  as  a  committee  of  the  lodge. 

The  defendant  bank  answered,  admitting  that  $770.72  was 
deposited  in  the  name  of  "D.  W.  Wheeler  or  Cornelius  Dug- 
gan, trustees,"  but  declined  to  pay  the  money  to  the  lodge 
without  an  order  signed  by  Wheeler  and  Duggan,  and  asserted 
their  willingness  to  pay  the  money  under  the  direction  of  the 
court. 

The  other  defendants  answered  denying  the  existence  of 
the  North  Brookfield  Lodge,  No.  28,  of  the  order  of  the  Knights 
of  St.  Crispin,  but  admitted  that  they  received  the  money 
from  one  assuming  to  be  the  treasurer  of  such  a  lodge,  and 
that  they  deposited  it  in  the  bank  as  trustees,  the  bank  declin- 
ing to  receive  it  in  the  name  of  the  lodge.  They  denied  that 
they  have  been  requested  by  any  one,  authorized  so  to  do,  to 
sign  an  order  to  withdraw  the  deposit.  And  denied  that  the 
plaintiffs  had  any  right  to  prosecute  the  suit  on  behalf  of 
others  than  themselves. 

The  case  was  referred  to  a  master,  a  part  of  whose  report 
was  as  follows: 

"The  North  Brookfield  Lodge,  No.  28,  of  the  order  of  the 
Knights  of  St.  Crispin,  is  an  unincorporated  and  voluntary 
association  in  the  town  of  North  Brookfield,  in  the  county  of 
Worcester,  composed  of  persons  employed  as  workmen  in  the 
manufacture  of  boots  and  shoes,  but  not  including  proprietors 
of  boot  and  shoe  manufacturing  establishments  who  employ 
workmen,  or  their  foremen.  Each  member  upon  being  ad- 
mitted to  the  association,  subscribes  his  name  to  the  constitu- 
tion and  by-laws,  and  also  signs  the  following  obligation:  'I 
will  not  teach  or  cause  to  be  taught  any  new  hand,  any  part 


THE  COMMON  LAW  401 

Qr  parts  of  the  boot  or  shoe  trade  without  the  permission  of 
the  lodge  of  which  I  am  a  member.' 

"The  North  Brookfield  Lodge  is  one  of  numerous  lodges  in 
this  state  organized  under  similar  constitutions.  Delegates 
from  these  lodges  constitute  what  is  called  the  'Grand  Lodge 
of  the  Order  of  Knights  of  St.  Crispin,  for  the  State  of  Massa- 
chusetts.'  Similar  grand  lodges  exist  in  many  of  the  United 
States  and  in  the  British  Provinces  in  North  America.  Dele- 
gates from  the  grand  lodges  and  subordinate  lodges  in  the 
United  States  and  British  Provinces,  constitute  what  is  called 
the  'International  Grand  Lodge  of  the  Order  of  the  Knights 
of  St.  Crispin.'  The  North  Brookfield  Lodge  was  organized 
in  1868,  under  a  charter  from  a  body  in  Milwaukee,  styling 
itself  the  '  National  Grand  Lodge  of  the  Knights  of  St.  Crispin, ' 
which  has  since  become  a  subordinate  lodge.  The  National 
Grand  Lodge  was  founded  in  Milwaukee  in  1868,  by  Newell 
Daniels  and  seven  others,  and  was  the  original  lodge  from 
which  all  the  others  have  sprung.  On  the  organization  of 
the  grand  lodge  and  the  international  grand  lodge  by  dele- 
gates, the  Milwaukee  lodge  became  a  mere  subordinate  lodge 
of  the  order. 

"At  a  meeting  of  the  members  of  the  North  Brookfield 
Lodge,  held  August  2,  1869,  the  following  vote  was  passed: 

"  'Voted,  That  there  be  a  committee  of  two  chosen  to  de- 
posit such  money  as  there  is  on  hand,  in  the  People's  Savings 
Bank,  Worcester,'  and  the  defendants,  Daniel  W.  Wheeler 
and  Cornelius  Duggan,  who  were  both  members  of  the  lodge, 
were  chosen  as  such  committee.  Said  committee  received  from 
the  treasurer  of  the  lodge  the  sum  of  six  hundred  and  fifty 
dollars,  and  August  31,  1869,  deposited  the  same  in  the  Peo- 
ple's Savings  Bank,  in  Worcester.  Said  sum  was  entered  upon 
the  books  of  the  bank  in  the  name  of  'D.  W.  Wheeler  or 
Cornelius  Duggan,  trustees,'  the  bank  declining  to  enter  it  in 
the  name  of  the  lodge.  The  money  has  never  been  withdrawn 
from  the  bank,  and  now  amounts  with  the  accumulations  to 
$770.72.  The  money  was  derived  from  initiation  fees  and 
monthly  dues  paid  in  by  the  members.  September  6,  1869,  a 
bill  of  $8.00  was  paid  by  the  lodge  to  Wheeler  and  Duggan 
for  their  expenses  to  Worcester  to  make  the  deposit. 

"At  a  meeting  of  the  members  of  the  lodge  held  November 

Kales  R.  of  T.  Vol.  1—26 


402    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

28,  1870,  T.  P.  Snow  and  Daniel  Sullivan  were  chosen  a  com- 
mittee to  wait  upon  Wheeler  and  Duggan  and  request  them  to 
sign  an  order  so  that  the  lodge  could  draw  the  funds  deposited 
in  the  People's  Savings  Bank.     December  19,  1870,  the  com- 
mittee reported  that  they  had  not  signed  the  order,  but  the 
committee  thought  they  would  sign  it  without  doubt.    Febru- 
ary 13,  1871,  W.  A.  Snow  and  A.  B.  Tatro  were  appointed  a 
committee  to  see  Duggan  in  regard  to  the  funds  in  the  Wor- 
cester bank.     January   15,    1872,    Sullivan   was   appointed   a 
committee  to  see  Duggan  and  get  his  signature  to  an  order 
for  the  money  in  the  People's  Savings  Bank  in  Worcester. 
February  12,  1872,  Sullivan  reported  that  Duggan  refused  to 
sign  an  order  for  the  money  deposited  in  the  savings  bank. 
February  26,  1872,  the  lodge  voted  that  the  trustees,  with  the 
sir  knight,   knight,   treasurer,   and  recording   scribe,   be   cm- 
powered  to  commence  a  suit  for  the  recovery  of  the  funds  of 
the  lodge,  provided  Judge  Cowley  deemed  it  advisable.     The 
defendant  Wheeler  was  requested  by  the  committee  chosen 
November  28,  1870,  to  sign  an  order  for  the  withdrawal  of 
the  money  in  the  bank,  to  which  Wheeler  replied  that  he  would 
sign  the  order  on  two  conditions:  that  the  lodge  should  give 
the  money  to  some  object  satisfactory  to  a  majority  of  the 
members   of  the  lodge,  and  relieve  him  from  liability;  and 
that  he  should  receive  a  discharge  from  the  lodge.     Wheeler 
testified  that  he  was  ready  to  pay  over  the  money  whenever 
It  should  be  determined  to  whom  it  belonged.     Duggan  was 
requested  to  sign  an  order  for  the  withdrawal  of  the  fund  from 
the  bank,  by  the  committee  appointed  November  28,  1870,  and 
also  by  the  committee  appointed  January  15,  1872,  but  in  both 
instances  he  refused  to  sign  it.    The  plaintiffs  are  officers  and 
members  of   the   lodge,   as   follows:     William   A.    Snow,    sir 
knight ;  John  R.  Nichols,  knight  and  trustee ;  Daniel  Sullivan, 
treasurer  and  financial  scribe ;  Joshua  C.  Simmons,  correspond- 
ing and  recording  scribe;  Joseph  Short,  trustee;  and  Amede 
B.  Tatro,   an  ordinary  member.     The   whole  number   of  the 
members  of  the  lodge  is  553.    Cornelius  Duggan  has  died  since 
the  commencement  of  this  suit.    There  was  never  any  vote  of 
the  lodge  adopting  its  constitution  and  by-laws,  but  they  were 
signed  by  each  member  at  the  time  of  his  admission.     The 
lodge,  being  a  subordinate  lodge,  was  never  organized  under 


THE  COMMON  LAW  403 

any  authority  derived  from  St.  1870,  c.  281.  Some  of  the 
members  of  the  lodge  have  requested  Wheeler  not  to  pay  over 
the  money  in  the  trustees'  hands  to  the  plaintiffs. 

"The  following  votes  and  doings  appeared  upon  the  records 
of  the  proceedings  of  the  lodge:  'September  20,  1869.  Com- 
plaint being  made  that  a  brother  had  a  green  hand  in  his  em- 
ploy, and  thait  he  also  exposed  the  secrecy  of  the  order  by 
giving  him  the  signs.    The  case  was  referred  to  a  committee.' 

"  'September  27,  1869.  Two  sir  knights  from  Montreal 
were  present.  The  English  S.  K.  was  first  introduced,  and  he 
made  a  speech  in  regard  to  a  strike  existing  there.  The 
French  sir  knight  was  next  introduced,  who  spoke  in  the 
French  language  upon  the  same  subject.  A  motion  was  made 
that  we  pay  a  hundred  dollars  out  of  the  treasury  to  assist 
the  Crispins  in  Montreal.  An  amendment  to  that  motion  was 
made  to  take  up  a  collection  in  the  lodge  also.  The  motion 
and  amendment  were  carried.' 

"  'January  18,  1869.  By  vote  the  lodge  consented  to  allow 
Brother  Mathews  to  take  his  brother-in-law  in  his  employ  to 
serve  out  the  remaining  five  months'  apprenticeship,  he  hav- 
ing already  served  seven  months  at  the  business  in  Webster, 
Mass. ' 

"  'February  8,  1869.  A  motion  carried  to  raise  money  to 
be  paid  out  of  the  treasury,  at  the  rate  of  25  cents  tax  per 
head  on  each  member  to  be  assessed,  and  replaced  in  the  treas- 
ury. This  money  to  be  sent  to  the  National  Grand  Lodge  for 
the  relief  of  existing  grievances  in  Milford.'  [This  related 
to  the  controversy  with  Samuel  Walker  in  Milford,  out  of 
which  sprung  the  suit  of  Samuel  Walker  against  Michael 
Cronin,  reported  107  Mass.  555.] 

"  'April  5,  1869.  Chose  a  committee  of  three  to  investigate 
in  regard  to  allowing  Brother  Nealy  to  take  his  nephew  as  an 
apprentice.  The  committee  consists  of  Edward  Dowling,  Hiram 
Thompson  and  Cornelius  Duggan.' 

"  'April  12,  1869.  Committee  on  Brother  Nealy 's  case  re- 
ported not  in  favor  of  allowing  him  to  take  his  nephew  as  an 
apprentice.' 

"  'August  2,  1869.  Complaint  being  made  that  a  person 
(not  a  Crispin)  named  Morean,  is  learning  new  help,  and  states 
that  he  cares  nothing  for  the  order.     Voted,  to  have  a  com- 


404    COIMBINATIONS  AND  RESTRAINT  OF  TRADE 

mittee  of  three  go  and  remonstrate  with  him,  and  also  investi- 
gate other  grievances  of  the  like,  wliieli  is  said  to  be  existing, 
and  report  to  the  lodge;  this  committee  to  be  a  standing  com- 
mittee for  three  months.  Harry  Eaton,  Lucius  M.  Frouty, 
Wm.  Clark,  committee.' 

"  'August  9,  1869.  Complaint  having  been  made  that 
Brother  Battredge  had  been  learning  a  boy,  and  he  having 
made  his  statement  here,  which  not  being  satisfactory  to  the 
lodge,  Voted,  that  said  Brother  Kittredge  should  desist  from 
learning  the  boy.  Voted,  that  there  be  a  committee  from  each 
room  in  the  big  shop  to  see  all  new  comers  in  said  shop  and 
induce  them  to  join,  and  if  belonging  to  other  lodges,  to  join 
by  card.  Mr.  Morean,  who  was  visited  by  the  committee  last 
week,  having  stated  that  he  would  join  the  order,  if  the  lodge 
would  allow  him  the  privilege  of  keeping  the  boy  who  is  at 
work  for  him,  and  the  man  having  lost  two  fingers,  which  would 
trouble  him  to  work  alone,  on  that  account  the  lodge  voted 
to  allow  him  the  privilege  if  he  would  join.  Seven  persons 
were  chosen  on  the  above  committee.' 

"  'August  16,  1869.  Voted,  that  all  new  help  coming  here 
to  work,  shall  be  obliged  to  get  a  transfer  card  before  they 
can  go  to  work.' 

"  'September  6,  1869.  The  case  of  Brother  Crawford  was 
brought  up.  Brother  Newman  made  report  that  Crawford 
stated  that  he  would  have  no  more  to  do  with  the  order. 
Brother  Newman's  report,  as  one  of  the  committee,  was  ac- 
cepted. Brother  Snow  made  a  motion  that  Crawford  be  sus- 
pended. The  motion  was  carried  by  a  unanimous  vote.  Motion 
was  made  that  there  be  a  committee  to  wait  upon  the  Batcheller 
firm  and  state  the  case.  Motion  was  carried.  D.  W.  Wheeler, 
Tilley  P.  Snow,  and  H.  H.  Green  chosen  committee.  Motion 
was  made  and  carried  that  the  sense  of  the  meeting  be  taken 
whether  the  brothers  would  stop  work  in  case  the  firm  refuse 
to  discharge  Crawford.  It  was  a  unanimous  vote  that  they 
would  turn  out.'  " 

The  master  gave  many  other  extracts  from  the  records  of 
the  lodge,  which  were  of  the  same  general  character. 

The  preamble  of  the  constitution  of  the  lodge,  which,  with 
the  by-laws,  and  with  the  constitutions  of  the  other  lodges 
mentioned,  was  annexed  to  the  master's  reoort.  declared  the 


THE  COIVBION  LAW  405 

object  of  the  organization  to  be  "to  rescue  our  trade  from  the 
condition  it  has  fallen  into,  and  to  raise  ourselves  to  that  re- 
spectable position  in  society  that  we,  as  free  citizens,  are  en- 
titled to,  and  to  secure  us  forever  against  any  further  en- 
croachments from  manufacturers." 

The  case  was  heard  by  Gray,  C.  J.,  and  reserved  upon  the 
pleadings  and  master's  report  for  the  consideration  and  de- 
termination of  the  full  court. 

COLT,  J.  [This  case  was  argued  in  writing,  and  considered 
by  all  the  judges.]  This  bill  is  brought  on  behalf  of  a  volun- 
tary association,  the  individual  members  of  which  are  too 
numerous  to  be  joined  as  plaintiffs,  and  it  is  therefore  brought 
in  the  name  of  a  few,  for  themselves  and  all  the  other  mem- 
bers. Birmingham  v.  Gallagher,  112  Mass.  190.  It  is  heard 
upon  the  pleadings  and  master's  report. 

The  individuals  named  as  defendants  were  members  of  the 
association,  and  received  its  funds  from  the  treasurer  as  a 
committee  chosen  to  deposit  the  same  for  safekeeping  in  the 
bank,  which  is  named  as  a  co-defendant  in  the  bill.  The 
money  was  deposited  in  their  names,  as  trustees,  and  they  now 
refuse  to  restore  it  to  the  control  of  the  association — the  de- 
fendant bank  refusing  to  pay  without  an  order  signed  by  the 
trustees,  but  submitting  itself  to  the  decree  of  the  court. 

The  only  question  before  us  is,  whether  upon  the  facts  stated 
in  the  master's  report,  and  contained  in  the  documents  re- 
ferred to,  the  trust  set  forth  must  have  been  assumed  by  the 
defendants  for  an  illegal  purpose.  The  plaintiffs  are  clearly 
entitled  to  recover  their  own  money  thus  detained  by  parties 
who  received  it  in  a  fiduciary  capacity,  unless  it  appears  that 
the  money  was  delivered  to  them,  or  must  be  held  when  re- 
covered by  the  plaintiffs,  for  a  purpose  immoral,  illegal  or 
contrary  to  public  policy. 

The  object  and  purposes  of  the  association  which  the  plain- 
tiffs represent  are  shown  by  the  constitution  and  by-laws  of 
the  lodge,  which  are  made  part  of  the  case ;  these  are  subscribed 
to  by  each  member  at  the  time  of  his  admission,  with  an  addi- 
tional agreement  ' '  not  to  teach  or  cause  to  be  taught  any  new 
hand  any  part  or  parts  of  the  boot  or  shoe  trade  without  the 
permission  of  the  lodge  of  which  I  am  a  member."    Its  mem- 


406    COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

bers  are  wholly  composed  of  individuals  employed  as  work- 
men in  the  manufacture  of  boots  and  shoes,  but  it  does  not 
include  proprietors  or  their  foremen. 

It  is  insisted  that  the  agreements  thus  established  between 
the  members  of  the  order  are  in  unlawful  restraint  of  trade, 
and  therefore  illegal,  as  being  against  public  policy.  But  in 
the  opinion  of  the  court  the  point  is  not  well  taken.  In  the 
relations  existing  between  labor  and  capital,  the  attempt  by 
cooperation  on  the  one  side  to  increase  wages  by  diminishing 
competition,  or  on  the  other  to  increase  the  profits  due  to 
capital,  is  within  certain  limits  lawful  and  proper.  It  ceases 
to  be  so  when  unlawful  coercion  is  employed  to  control  the 
freedom  of  the  individual  in  disposing  of  his  labor  or  capital. 
It  is  not  easy  to  give  a  definition  which  shall  include  every 
form  of  such  coercion ;  it  is  enough  that  in  the  compact  before 
us  there  is  no  evidence  of  any  purpose  to  use  such  unlawful 
means  in  any  form.  In  Walker  v.  Cronin,  107  Mass.  555,  564, 
it  is  said  that  "every  one  has  a  right  to  enjoy  the  fruits  and 
advantages  of  his  own  enterprise,  industry,  skill  and  credit. 
He  has  no  right  to  be  protected  against  competition ;  but  he 
has  a  right  to  be  free  from  malicious  and  wanton  interference, 
disturbance  or  annoyance.  If  disturbance  or  loss  come  as  a 
result  of  competition  or  the  exercise  of  like  rights  by  others, 
it  is  damnu-m  absque  injuria." 

In  Carew  v.  Rutherford,  106  Mass.  1,  14,  it  is  said,  "Every 
man  has  a  right  to  determine  what  branch  of  business  he  will 
pursue,  and  to  make  his  own  contracts  with  whom  he  pleases 
and  on  the  best  terms  he  can."  "He  may  refuse  to  deal  with 
any  man  or  class  of  men.  And  it  is  no  crime  for  any  number 
of  persons,  without  an  unlawful  object  in  view,  to  associate 
themselves  together  and  agree  that  they  will  not  work  for  or 
deal  with  certain  men  or  classes  of  men,  or  work  under  a  cer- 
tain price,  or  without  certain  conditions."  And  in  Common- 
wealth V.  Hunt,  4  Met.  Ill,  134,  Shaw,  C.  J.,  declares  that 
the  legality  of  such  association  will  depend  upon  the  means 
to  be  used  for  the  accomplishment  of  its  objects  and  whether 
they  be  innocent  or  otherwise. 

In  the  case  at  bar  there  is  no  evidence  afforded  by  the  docu- 
ments submitted  to  us  that  the  purposes  of  this  association  are 
unlawful   by  the   rule   stated.     Unlawful   coercion   certainly 


THE  COMMON  LAW  407 

does  not  appear  to  be  intended.  And  the  right  of  the  members 
to  instruct  whom  they  choose  in  the  mysteries  of  their  trade 
cannot  be  denied.  The  case  presented  is  not  one  where  there 
is  evidence  to  justify  us  in  finding  that  the  objects  and  pur- 
poses of  the  association  are  fraudulently  and  colorably  de- 
clared as  a  cover  for  a  secret  unlawful  agreement  of  its 
members.  It  will  be  time  enough  to  deal  with  such  a  case 
when  it  arises. 

In  this  view,  it  is  not  necessary  critically  to  examine  the 
instances  of  alleged  illegal  conduct  which  it  is  said  are  found 
upon  the  records  of  the  association,  or  to  inquire  whether  they 
amount  to  illegal  restraint  of  that  freedom  in  trade  which  the 
law  secures  to  all,  because  specific  wrongful  acts  cannot  be 
shown  to  defeat  the  plaintiffs'  claim,  unless  it  be  also  shown 
that  such  acts  come  within  the  scope  and  purpose  of  the  organ- 
ization. Each  act  of  wrong,  outside  the  declared  and  real 
purpose  of  the  lodge,  stands  by  itself,  to  be  answered  for  only 
by  those  who  join  in  its  perpetration. 

Decree  for  the  plaintiffs,  with  costs  against  the  individual 
defendants  only. 


THOMAS  v.  CINCINNATI,  N.  0.  &  T.  P.  KY.  CO. 

(Circuit  Court,  Southern  Dist.  of  Ohio,  Western  Div.  1894. 

62  Fed.  803.) 

Per  TAFT,  Circuit  Judge,'^^     .     .     . 

Now,  it  may  be  conceded  in  the  outset  that  the  employes  of 
the  receiver  had  the  right  to  organize  into  or  to  join  a  labor 
union  which  should  take  joint  action  as  to  their  terms  of  em- 
ployment. It  is  of  benefit  to  them  and  to  the  public  that 
laborers  should  unite  in  their  common  interest  and  for  lawful 
purposes.  They  have  labor  to  sell.  If  they  stand  together, 
they  are  often  able,  all  of  them,  to  command  better  prices  for 
their  labor  than  when  dealing  singly  with  rich  employers,  be- 
cause the  necessities  of  the  single  employe  may  compel  him 

70 — Only  an  extract  from  the 
opinion  of  Taft,  Circuit  Judge,  is 
given. 


408    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

to  accept  any  terms  offered  him.  The  accumulation  of  a  fund 
for  the  support  of  those  who  feel  that  the  wages  offered  are 
below  market  prices  is  one  of  the  legitimate  objects  of  such 
an  organization.  They  have  the  right  to  appoint  officers  who 
shall  advise  them  as  to  the  course  to  be  taken  by  them  in  their 
relations  with  their  employer.  They  may  unite  with  other 
unions.  The  officers  they  appoint,  or  any  other  person  to 
whom  they  choose  to  listen,  may  advise  them  as  to  the  proper 
course  to  be  taken  by  them  in  regard  to  their  employment,  or, 
if  they  choose  to  repose  such  authority  in  any  one,  may  order 
them,  on  pain  of  expulsion  from  their  union,  peaceably  to  leave 
the  employ  of  their  employer  because  any  of  the  terms  of  their 
employment  are  unsatisfactory.  It  follows,  therefore  (to  give 
an  illustration  which  will  be  understood),  that  if  Phelan  had 
come  to  this  city  when  the  receiver  reduced  the  wages  of  his 
employes  by  10  per  cent.,  and  had  urged  a  peaceable  strike, 
and  had  succeeded  in  maintaining  one,  the  loss  to  the  business 
of  the  receiver  would  not  be  ground  for  recovering  damages, 
and  Phelan  would  not  have  been  liable  to  contempt  even  if 
the  strike  much  impeded  the  operation  of  the  road  under  the 
order  of  the  court.  His  action  in  giving  the  advice,  or  issuing 
an  order  based  on  unsatisfactory  terms  of  employment,  would 
have  been  entirely  lawful."^^ 


CURRAN  v.  GALEN 

(Court  of  Appeals  of  New  York,  1897.    152  N.  Y.  33.) 

Appeal  from  supreme  court,  general  term.  Fifth  department. 

Action  by  Charles  Curran  against  Louis  Galen  and  others. 
From  a  judgment  of  the  general  term  (28  N.  Y.  Supp.  1134, 
mem.)  affirming  a  judgment  for  plaintiff,  defendants  appeal. 
Affirmed. 

The  plaintiff  demands  damages  against  the  defendants  for 
having  confederated  and  conspired  together  to  injure  him  by 
taking  away  his  means  of  earning  a  livelihood  and  preventing 
him  from  obtaining  employment.    He  sets  out  in  his  complaint 

71 — See   also   Wabash    E.    Co.    v. 
Hannahan,   121  Fed.  563,  567,  569. 


THE  COIVEMON  LAW  409 

that  he  was  an  engineer  by  trade,  and  that,  previously  to  the 
acts  mentioned,  he  was  earning,  by  reason  of  his  trade,  a  large 
income,  and  had  constant  employment  at  remunerative  wages. 
He  sets  forth  the  existence  of  an  unincorporated  association 
in  the  city  of  Rochester,  where  he  was  a  resident,  called  the 
Brewery  Workingmen's  Local  Assembly,  1,796,  Knights  of 
Labor,  which  was  composed  of  workingmen  employed  in  the 
brewing  business  in  that  city,  and  was  a  branch  of  a  national 
organization  known  as  the  Knights  of  Labor.  He  alleges  that 
it  assumes  to  control  by  its  rules  and  regulations  the  acts  of 
its  members  in  relation  to  that  trade  and  employment,  and 
demands  and  obtains  from  its  members  implicit  obedience  in 
relation  thereto.  Plaintiff  then  alleges  in  his  complaint  that 
the  defendants  Grossberger  and  Watts  wrongfully  and  ma- 
liciously conspired  and  combined  together,  and  with  the  said 
local  assembly,  for  the  purpose  of  injuring  him  and  taking 
away  his  means  of  earning  a  livelihood,  in  the  following  man- 
ner, to  wit:  That  in  the  month  of  November,  1890,  Gross- 
berger and  Watts  threatened  the  plaintiff  that  unless  he  would 
join  said  local  assembly,  pay  the  initiation  fee,  and  subject 
himself  to  its  rules  and  regulations,  they  and  that  association 
would  obtain  plaintiff's  discharge  from  the  employment  in 
which  he  then  was,  and  would  make  it  impossible  for  him  to 
obtain  any  employment  in  the  city  of  Rochester  or  elsewhere, 
unless  he  became  a  member  of  said  association.  In  pursuance 
of  that  conspiracy,  upon  plaintiff' 's  refusing  to  become  a  mem- 
ber of  said  association,  Grossberger  and  Watts  and  the  asso- 
ciation made  complaint  to  the  plaintiff's  employers,  and  forced 
them  to  discharge  him  from  their  employ,  and,  by  false  and 
malicious  reports  in  regard  to  him,  sought  to  bring  him  into 
ill  repute  with  members  of  his  trade  and  employers,  and  to 
prevent  him  from  prosecuting  his  trade  and  earning  a  liveli- 
hood. The  answer,  in  the  first  place,  admitted  all  that  was 
alleged  in  respect  to  the  organization  of  the  local  assembly, 
as  to  how  it  was  composed,  and  as  to  its  being  a  branch  of  the 
national  organization  of  the  Knights  of  Labor,  and  as  to  its 
assuming  to  control  the  acts  of  its  members,  and  to  demand 
from  them  implicit  obedience.  It  then  denies,  generally  and 
specifically,  each  and  every  other  allegation  in  the  complaint. 
As  a  second  and  separate  answer  and  defense  to  the  complaint. 


410    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  defendants  set  up  the  existence  in  the  city  of  Rochester 
of  the  Ale  Brewers'  Association,  and  an  agreement  between 
that  association  and  the  local  assembly  described  in  the  com- 
plaint, to  the  effect  that  all  employes  of  the  brewery  companies 
belonging  to  the  Ale  Brewers'  Association  "shall  be  members 
of  the  Brewery  Workingmen's  Local  Assembly,  1,796,  Knights 
of  Labor,  and  that  no  employe  should  work  for  a  longer  period 
than  four  weeks  without  becoming  a  member."  They  alleged 
that  the  plaintiff  was  retained  in  the  employment  of  the  Miller 
Brewing  Company  "for  more  than  four  weeks  after  he  was 
notified  of  the  provisions  of  said  agreement,  requiring  him  to 
become  a  member  of  the  local  assembly";  that  defendants 
requested  plaintiff  to  become  a  member,  and,  upon  his  refusal 
to  comply,  "Grossberger  and  Watts,  as  members  of  said  as- 
sembly, and  as  a  committee  duly  appointed  for  that  purpose, 
notified  the  officers  of  the  Miller  Brewing  Company  that  plain- 
tiff, after  repeated  requests,  had  refused  for  more*  than  four 
weeks  to  become  a  member  of  said  assembly";  and  that  "de- 
fendants did  so  solely  in  pursuance  of  said  agreement,  and  in 
accordance  with  the  terms  thereof,  and  without  intent  or  pur- 
pose to  injure  plaintiff  in  any  way,"  The  plaintiff  demurred 
to  the  matter  set  up  as  a  separate  defense  to  the  complaint, 
upon  the  ground  that  it  was  insufficient,  in  law,  upon  the  face 
thereof.  The  special  term  and  general  term  have  sustained  the 
demurrer,  and  the  question  is  whether  this  matter  set  up  by 
way  of  special  defense  is  sufficient  to  exonerate  the  defendants 
from  the  charge,  made  in  the  complaint,  of  a  conspiracy  to 
injure  the  plaintiff  and  to  deprive  him  of  the  means  of  earning 
his  livelihood. 

Per  Curiam,  In  the  decision  of  the  question  before  us 
we  have  to  consider  whether  the  agreement  upon  which  the 
defendants  rely  in  defense  of  this  action,  and  to  justify  their 
part  in  the  dismissal  of  the  plaintiff  from  his  employment,  was 
one  which  the  law  will  regard  with  favor  and  uphold  when 
compliance  with  its  requirements  is  made  a  test  of  the  individ- 
ual's right  to  be  employed.  If  such  an  agreement  is  lawful, 
then  it  must  be  conceded  that  the  defendants  are  entitled  to 
set  it  up  as  a  defense  to  the  action,  forasmuch  as  they  allege 
that  what  they  did  was  in  accordance  with  its  terms. 


THE  COMMON  LAW  411 

In  the  general  consideration  of  the  subject,  it  must  be 
premised  that  the  organization  or  the  co-operation  of  work- 
ingmen  is  not  against  any  public  policy.  Indeed,  it  must  be 
regarded  as  having  the  sanction  of  law  when  it  is  for  such 
legitimate  purposes  as  that  of  obtaining  an  advance  in  the  rate 
of  wages  or  compensation,  or  of  maintaining  such  rate.  Pen. 
Code,  §  170.  It  is  proper  and  praiseworthy,  and  perhaps  falls 
within  that  general  view  of  human  society  which  perceives  an 
underlying  law  that  men  should  unite  to  achieve  that  which 
each  by  himself  cannot  achieve,  or  can  achieve  less  readily. 
But  the  social  principle  which  justifies  such  organizations  is 
departed  from  when  they  are  so  extended  in  their  operation 
as  either  to  intend  or  to  accomplish  injury  to  others.  Public 
policy  and  the  interests  of  society  favor  the  utmost  freedom 
in  the  citizen  to  pursue  his  lawful  trade  or  calling,  and  if  the 
purpose  of  an  organization  or  combination  of  workingmen  be 
to  hamper  or  to  restrict  that  freedom,  and,  through  contracts 
or  arrangements  with  employers,  to  coerce  other  workingmen 
to  become  members  of  the  organization  and  to  come  under  its 
rules  and  conditions,  under  the  penalty  of  the  loss  of  their 
positions  and  of  deprivation  of  employment,  then  that  pur- 
pose seems  clearly  unlawful,  and  militates  against  the  spirit 
of  our  government  and  the  nature  of  our  institutions.  The 
effectuation  of  such  a  purpose  would  conflict  with  that  prin- 
ciple of  public  policy  which  prohibits  monopolies  and  exclusive 
privileges.  It  would  tend  to  deprive  the  public  of  the  services 
of  men  in  useful  employments  and  capacities.  It  would,  to 
use  the  language  of  Mr.  Justice  Barrett  in  People  v.  Smith, 
5  N.  Y.  Cr.  R.,  at  page  513,  "impoverish  and  crush  a  citizen 
for  no  reason  connected  in  the  slightest  degree  with  the  ad.- 
vancement  of  wages  or  the  maintenance  of  the  rate." 

Every  citizen  is  deeply  interested  in  the  strict  maintenance 
of  the  constitutional  right  freely  to  pursue  a  lawful  avocation 
under  conditions  equal  as  to  all,  and  to  enjoy  the  fruits  of  his 
labor,  without  the  imposition  of  any  conditions  not  required 
for  the  general  welfare  of  the  community.  The  candid  mind 
should  shrink  from  the  results  of  the  operation  of  the  principle 
contended  for  here ;  for  there  would  certainly  be  a  compulsion 
or  a  fettering  of  the  individual  glaringly  at  variance  with  that 
freedom  in  the  pursuit  of  happiness  which  is  believed  to  be 


412    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

guarantied  to  all  by  the  provisions  of  the  fundamental  law  of 
the  state.  The  sympathies  or  the  fellow  feeling  which,  as  a 
social  principle,  underlies  the  association  of  workingmen  for 
their  common  benefit,  are  not  consistent  with  a  pui-pose  to 
oppress  the  individual  who  prefers  by  single  effort  to  gain  his 
livelihood.  If  organization  of  workingmen  is  in  line  with  good 
government,  it  is  because  it  is  intended  as  a  legitimate  instru- 
mentality to  promote  the  common  good  of  its  members.  If  it 
militates  against  the  general  public  interest,  if  its  powers  are 
directed  towards  the  repression  of  individual  freedom,  upon 
what  principle  shall  it  be  justified?  In  Reg.  v.  Rowlands,  17 
Adol.  &  E.  (N.  S.)  *671,  the  question  involved  was  of  the  right 
by  combination  to  prevent  certain  workingmen  from  working 
for  their  employers,  and  thereby  to  compel  the  latter  to  make 
an  alteration  in  the  mode  of  conducting  their  business.  The 
court  of  queen's  bench,  upon  a  motion  for  a  new  trial  for  mis- 
direction of  the  jury  by  Mr.  Justice  Erie  below,  approved 
of  his  charge,  and  we  quote  from  his  remarks.  He  instructed 
the  jury  that  ''a  combination  for  the  purpose  of  injuring  an- 
other is  a  combination  of  a  different  nature,  directed  personally 
against  the  party  to  be  injured,  and  the  law  allowing  them 
to  combine  for  the  purpose  of  obtaining  a  lawful  benefit  to 
themselves  gives  no  sanction  to  combinations  which  have  for 
their  immediate  purpose  the  hurt  of  another.  The  rights  of 
workmen  are  conceded,  but  the  exercise  of  free  will  and  free- 
dom of  action,  within  the  limits  of  the  law,  is  also  secured 
equally  to  the  masters.  The  intention  of  the  law  is,  at  present, 
to  allow  either  of  them  to  follow  the  dictates  of  their  own  will 
with  respect  to  their  own  actions  and  their  own  property,  and 
either,  I  believe,  has  a  right  to  study  to  promote  his  own  ad- 
vantage, or  to  combine  with  others  to  promote  their  mutual 
advantage." 

The  organization  of  the  local  assembly  in  question  by  the 
workingmen  in  the  breweries  of  the  city  of  Rochester  may 
have  been  perfectly  lawful  in  its  general  purposes  and  meth- 
ods, and  may  otherwise  wield  its  power  and  influence  usefully 
and  justly,  for  all  that  appears.  It  is  not  for  us  to  say,  nor  do 
we  intend  to  intimate,  to  the  contrary;  but  so  far  as  a  pur- 
pose appears  from  the  defense  set  up  to  the  complaint  that  no 
employe  of  a  brewing  company  shall  be  allowed  to  work  for  a 


THE  COMMON  LATV  413 

longer  period  than  four  weeks  without  becoming  a  member  of 
the  Workingmen's  Local  Assembly,  and  that  a  contract  be- 
tween the  local  assembly  and  the  Ale  Brewers'  Association 
shall  be  availed  of  to  compel  the  discharge  of  the  independent 
employe,  it  is,  in  effect,  a  threat  to  keep  persons  from  work- 
ing at  the  particular  trade,  and  to  procure  their  dismissal 
from  employment.  While  it  may  be  true,  as  argued,  that  the 
contract  was  entered  into,  on  the  part  of  the  Ale  Brewers' 
Association,  with  the  object  of  avoiding  disputes  and  conflicts 
with  the  workingmen's  organization,  that  feature  and  such  an 
intention  cannot  aid  the  defense,  nor  legalize  a  plan  of  com- 
pelling workingmen  not  in  affiliation  with  the  organization  to 
join  it,  at  the  peril  of  being  deprived  of  their  employment  and 
of  the  means  of  making  a  livelihood. 

In  our  judgment,  the  defense  pleaded  was  insufficient,  in 
law,  upon  the  face  thereof,  and  therefore  the  demurrer  thereto 
was  properly  sustained. 

The  judgment  appealed  from  should  be  affirmed,  with  costs. 

All  concur,  except  Haight,  J.,  not  sitting. 

Judgment  affirmed. 


NATIONAL  PROTECTIVE  ASSN.  v.  CUMMING 
(Court  of  Appeals  of  New  York,  1902.     170  N.  Y.  315.)72 

PARKER,  C.  J.  The  order  of  the  appellate  division  should 
be  affirmed,  on  the  ground  that  the  facts  found  do  not  support 
the  judgment  of  the  special  term.  In  the  discussion  of  that 
proposition,  I  shall  assume  that  certain  principles  of  law  laid 
down  in  the  opinion  of  Judge  Vann  are  correct,  namely : 

"It  is  not  the  duty  of  one  man  to  work  for  another  unless 
he  has  agreed  to,  and  if  he  has  so  agreed,  but  for  no  fixed 
period,  either  may  end  the  contract  whenever  he  chooses.  The 
one  may  work  or  refuse  to  work  at  will,  and  the  other  may 
hire  or  discharge  at  wiU.  The  terms  of  employment  are  sub- 
ject to  mutual  agreement,  without  let  or  hindrance  from  any 
one.    If  the  terms  do  not  suit,  or  the  employer  does  not  please, 

72 — Only  the  opiDions  are  given. 


414    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  right  to  quit  is  absolute,  and  no  one  may  demand  a  reason 
therefor.  Whatever  one  man  may  do  alone,  he  may  do  in 
combination  with  others,  provided  they  have  no  unlawful  ob- 
ject in  view.  Mere  numbers  do  not  ordinarily  affect  the  quality 
of  the  act.  Workingmen  have  the  right  to  organize  for  the 
purpose  of  securing  higher  wages,  shorter  hours  of  labor,  or 
improving  their  relations  with  their  employers.  They  have 
the  right  to  strike  (that  is,  to  cease  working  in  a  body  by  pre- 
arrangement  until  a  grievance  is  redressed),  provided  the  object 
is  not  to  gratify  malice  or  inflict  injury  upon  others,  but  to 
secure  better  terms  of  employment  for  themselves.  A  peace- 
able and  orderly  strike,  not  to  harm  others,  but  to  improve 
their  own  condition,  is  not  in  violation  of  law."  Stated  in 
other  words,  the  propositions  quoted  recognize  the  right  of  one 
man  to  refuse  to  work  for  another  on  any  ground  that  he  may 
regard  as  sufficient,  and  the  employer  has  no  right  to  demand 
a  reason  for  it.  But  there  is,  I  take  it,  no  legal  objection  to 
the  employe's  giving  a  reason,  if  he  has  one,  and  the  fact  that 
the  reason  given  is  that  he  refuses  to  work  with  another  who 
is  not  a  member  of  his  organization,  whether  stated  to  his  em- 
ployer or  not,  does  not  affect  his  right  to  stop  work ;  nor  does 
it  give  a  cause  of  action  to  the  workman  to  whom  he  objects, 
because  the  employer  sees  fit  to  discharge  the  man  objected 
to,  rather  than  lose  the  services  of  the  objector. 

The  same  rule  applies  to  a  body  of  men,  who,  having  organ- 
ized, for  purposes  deemed  beneficial  to  themselves,  refuse  to 
work.  Their  reasons  may  seem  inadequate  to  others,  but,  if 
it  seems  to  be  in  their  interest  as  members  of  an  organization 
to  refuse  longer  to  work,  it  is  their  legal  right  to  stop.  The 
reason  may  no  more  be  demanded,  as  a  right,  of  the  organiza- 
tion than  of  an  individual ;  but,  if  they  elect  to  state  the  reason, 
their  right  to  stop  work  is  not  cut  off  because  the  reason  seems 
inadequate  or  selfish  to  the  employer  or  to  organized  society. 
And  if  the  conduct  of  the  members  of  an  organization  is  legal 
in  itself,  it  does  not  become  illegal  because  the  organization 
directs  one  of  its  members  to  state  the  reason  for  its  conduct. 

The  principles  quoted  above  recognize  the  legal  right  of 
members  of  an  organization  to  strike  (that  is,  to  cease  work- 
ing in  a  body  by  prearrangement  until  a  grievance  is  re- 
dressed), and  they  enumerate  some  things  that  may  be  treated 


THE  COMMON  LAW  415 

as  the  subject  of  a  grievance,  namely,  the  desire  to  obtain 
higher  wages,  shorter  hours  of  labor,  or  improved  relations 
with  their  employers;  but  this  enumeration  does  not,  I  take  it, 
purport  to  cover  all  the  grounds  which  will  lawfully  justify 
members  of  an  organization  refusing  in  a  body  and  by  pre- 
arrangement,  to  work.  The  enumeration  is  illustrative,  rather 
than  comprehensive;  for  the  object  of  such  an  organization  is 
to  benefit  all  its  members,  and  it  is  their  right  to  strike,  if 
need  be,  in  order  to  secure  any  lawful  benefit  to  the  several 
members  of  the  organization, — as,  for  instance,  to  secure  the 
re-employment  of  a  member  they  regard  as  having  been  im- 
properly discharged,  and  to  secure  from  an  employer  of  a 
number  of  them  employment  for  other  members  of  their  organ- 
ization who  may  be  out  of  employment,  although  the  effect 
will  be  to  cause  the  discharge  of  other  employes  who  are  not 
members. 

And  whenever  the  courts  can  see  that  a  refusal  of  members 
of  an  organization  to  work  with  nonmembers  may  be  in  the 
interest  of  the  several  members,  it  will  not  assume,  in  the 
absence  of  a  finding  to  the  contrary,  that  the  object  of  such 
refusal  was  solely  to  gratify  malice,  and  to  inflict  injury  upon 
such  nonmembers. 

A  number  of  reasons  for  the  action  of  the  organization  will 
at  once  suggest  themselves  in  a  case  like  this.  One  reason  ap- 
parent from  the  findings  in  this  case^  as  I  shall  show  later,  is 
the  desire  of  the  organization  that  its  own  members  may  do 
the  work  the  nonmembei^  are  performing.  And  another  most 
important  reason  is  suggested  by  the  fact  that  these  particular 
organizations,  associations  of  steam  fitters,  required  every 
applicant  for  membership  to  pass  an  examination  testing  his 
competency.  Now,  one  of  the  objections  sometimes  urged 
against  labor  organizations  is  that  unskillful  workmen  receive 
as  large  compensation  as  those  thoroughly  competent.  The 
examination  required  by  the  defendant  associations  tends  to 
do  away  with  the  force  of  that  objection  as  to  them.  And 
again,  their  restriction  of  membership  to  those  who  have  stood 
a  prescribed  test  must  have  the  effect  of  securing  careful  as 
well  as  skillful  associates  in  their  work,  and  that  is  a  matter 
of  no  small  importance,  in  view  of  the  state  of  the  law,  which 
absolves  the  master  from  liability  for  injuries  sustained  by  a 


416    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

workman  through  the  carelessness  of  a  co-employe.  So  long 
as  the  law  compels  the  employe  to  bear  the  burden  of  the  injury 
in  such  cases,  it  cannot  be  open  to  question  but  that  a  legiti- 
mate and  necessary  object  of  societies  like  the  defendant  asso- 
ciations would  be  to  assure  the  lives  and  limbs  of  their  members 
against  the  negligent  acts  of  a  reckless  co-employe ;  and  hence 
it  is  clearly  within  the  right  of  an  organization  to  provide 
such  a  method  of  examination  and  such  tests  as  will  secure  a 
careful  and  competent  membership,  and  to  insist  that  protec- 
tion of  life  and  limb  requires  that  they  shall  not  be  compelled 
to  work  with  men  whom  they  have  not  seen  fit  to  admit  into 
their  organization,  as  happened  in  the  case  of  the  plaintiff 
McQueed. 

While  I  purpose  to  take  the  broader  ground,  which  I  deem 
fully  justified  by  the  principles  quoted,  as  well  as  the  authori- 
ties, that  the  defendants  had  the  right  to  strike  for  any  reason 
they  deemed  a  just  one,  and,  further,  had  the  right  to  notify 
their  employer  of  their  purpose  to  strike,  I  am  unable  to  see 
how  it  is  possible  to  deny  the  right  of  these  defendant  organ- 
izations and  their  members  to  refuse  to  work  with  nonmembers, 
when,  in  the  event  of  injury  by  the  carelessness  of  such  co- 
employes,  the  burden  would  have  to  be  borne  by  the  injured, 
without  compensation  from  the  employer,  and  with  no  finan- 
cial responsibility,  as  a  general  rule,  on  the  part  of  those 
causing  the  injury ;  for  it  is  well  known  that  some  men,  even 
in  the  presence  of  danger,  are  perfectly  reckless  of  themselves 
and  careless  of  the  rights  of  others,  with  the  result  that  acci- 
dents are  occurring  almost  constantly  which  snuff  out  the  lives 
of  workmen  as  if  they  were  candles,  or  leave  them  to  struggle 
through  life  maimed  and  helpless.  These  careless,  reckless 
men  are  known  to  their  associates,  who  not  only  have  the  right 
to  protect  themselves  from  such  men,  but,  in  the  present  state 
of  the  law,  it  is  their  duty,  through  their  organizations,  to 
attempt  to  do  it,  as  to  the  trades  affording  special  opportuni- 
ties for  mischief  arising  from  recklessness. 

I  know  it  is  said  in  another  opinion  in  this  case  that  ' '  work- 
men cannot  dictate  to  employers  how  they  shall  carry  on  their 
business,  nor  whom  they  shall  or  shall  not  employ";  but  I 
dissent  absolutely  from  that  proposition,  and  assert  that,  so 
long  as  workmen  must  assume  all  the  risk  of  injury  that  may 


THE  COMMON  LAW  417 

come  to  them  through  the  carelessness  of  co-employes,  they 
have  the  moral  and  legal  right  to  say  that  they  will  not  work 
with  certain  men,  and  the  employer  must  accept  their  dicta- 
tion or  go  without  their  services. 

If  it  be  true,  as  was  recently  intimated  by  the  supreme 
court  of  Pennsylvania  in  Durkin  v.  Coal  Co.,  171  Pa.  193,  29 
L.  R.  A.  808,  50  Am.  St.  Rep.  801,  that  an  act  of  the  legislature 
which  undertakes  to  "reverse  the  settled  law  upon  the  subject, 
and  declare  that  the  employer  shall  be  responsible  for  an 
injury  to  an  employe  resulting  from  the  negligence  of 
a  fellow  workman,"  is  unconstitutional,— a  doctrine  from  which 
I  dissent  (see  Tullis  v.  Railroad  Co.,  175  U.  S.  348,  44  L.  Ed. 
192),  but  which  it  is  possible  may  receive  the  support  of 
the  courts, — then  the  only  opportunity  for  protection,  in  the 
future  as  well  as  the  present,  to  workmen  engaged  in  dan- 
gerous occupations,  is  through  organizations  like  these  de- 
fendant associatio-ns,  which  restrict  their  memberships  to 
careful  and  skillful  men,  and  prohibit  their  members  from 
working  with  members  of  other  organizations  which  maintain 
a  lower  standard  or  none  at  all.  For  the  master's  duty  is  dis- 
charged if  the  workman  be  competent,  and  for  his  reckless- 
ness, which  renders  his  employment  a  menace  to  others,  the 
master  is  not  responsible. 

But  I  shall  not  further  pursue  this  subject.  My  object  in 
alluding  to  it  is  to  emphasize  the  fact  that  there  are  other 
purposes  for  which  labor  organizations  can  be  effectually  used 
than  those  quoted  above,  and  also  because  it  is  fairly  infer- 
able from  the  facts  found  that  the  members  of  plaintiff  asso- 
ciation were  objectionable  to  defendants  because  not  up  to 
the  latter 's  standards,  so  as  to  make  them  eligible  for  mem- 
bership in  defendant  organizations,  and  that  this  was  the 
motive  for  defendants'  acts  in  holding  a  strike,  and  notifying 
their  employer  of  their  intention  to  do  so.  But  whether  this 
be  so  or  not,  when  it  can  be  seen  from  the  facts  found  that  such 
or  other  motives  of  advantage  to  themselves  may  have  prompted 
defendants'  action,  a  court  which  can  review  only  upon  the 
law  certainly  will  not  presume  that  another  and  an  unlawful 
motive,  and  one  not  stated  in  the  findings  of  fact,  prompted 
the  action  of  the  organization  and  its  members.  In  other 
words,  this  court  cannot  import  into  the  findings  of  fact  a  fact 

Kales  R.  of  T.  Vol.  I— ST 


418    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

that  is  not  therein  expressed.  This  is  not  a  case  of  iinanimoua 
affirmance,  but  one  of  reversal;  and,  under  section  1338  of 
the  Code  of  Civil  Procedure,  we  are  to  assume  that  the  appel- 
late division  intended  to  affirm  the  facts  as  found  by  the  trial 
court,  and,  having  so  affirmed  them,  it  then  reversed  because 
they  were  insufficient  in  law  to  support  the  judgment.  It  is 
our  duty,  therefore,  if  we  discover  that  the  facts  as  actually 
found  are  insufficient  to  support  the  conclusion  of  law,  to 
sustain  the  action  of  the  appellate  division  in  reversing  the 
judgment.  National  HaiTow  Co.  v.  Bement  &  Sons,  163  N.  Y. 
505,  and  cases  cited. 

In  Bowen  v.  Matheson,  14  Allen  ,499,  the  court  had  before  it 
on  demurrer  a  declaration  in  an  action  where  the  defendants' 
business  had  been  practically  broken  up,  and  it  said:  "In 
order  to  be  good,  the  declaration  must  allege  against  the 
defendants  the  commission  of  illegal  acts.  Its  allegationa 
must  be  analyzed  to  ascertain  whether  they  contain  a  sufficient 
statement  of  such  acts."  This  was  followed  by  an  interesting 
analysis,  which  resulted  in  disclosing  that  no  illegal  act  was 
alleged,  notwithstanding  the  liberal  use  of  such  extravagant 
words  and  phrases  as  "maliciously  conspiring  together,"  and 
"feUow  conspirators  as  aforesaid  in  pursuance  of  their  con- 
spiracy as  aforesaid,"  whereupon  the  demurrer  was  sustained, 
and  a  precedent  created,  which  should  be  followed  in  this 
case. 

Now,  before  taking  up  the  findings  of  fact  for  analysis  in 
the  light  of  the  principles  quoted  above,  as  was  done  in 
Bowen 's  Case,  and  with  the  view  of  showing  that  they  do  not 
sustain  the  judgment  of  the  special  term,  I  wish  to  again  call 
attention  to  the  rules  quoted,  and  particularly  to  so  much  of 
them  as  intimates  that  if  the  motive  be  unlawful,  or  be  not  for 
the  good  of  the  organization  or  some  of  its  members,  but 
prompted  wholly  by  malice  and  a  desire  to  injure  others,  then 
an  act  which  would  be  otherwise  legal  becomes  unlawful.  To 
state  it  concretely,  if  an  organization  strikes  to  help  its  mem- 
bers, the  strike  is  lawful.  If  its  purpose  be  merely  to  injure 
nonmembers,  it  is  unlawful.  If  the  organization  notifies  the 
employer  that  its  members  will  not  work  with  nonmembers, 
and  its  real  object  is  to  benefit  the  organization  and  secure 
employment  for  its  members,  it  is  lawful.    If  its  sole  purpose 


THE  COMMON  LAW  419 

be  to  prevent  nonmembers  working,  then  it  is  unlawful.  I  do 
not  assent  to  this  proposition,  although  there  is  authority  for 
it.  It  seems  to  me  illogical  and  little  short  of  absurd  to  say 
that  the  everyday  acts  of  the  business  world,  apparently 
within  the  domain  of  competition,  may  be  either  lawful  or 
unla-^^ul  according  to  the  motive  of  the  actor.  If  the  motive 
be  good,  the  act  is  lawful.  If  it  be  bad,  the  act  is  unlawful. 
Within  all  the  authorities  upholding  the  principle  of  com- 
petition, if  the  motive  be  to  destroy  another's  business  in  order 
to  secure  business  for  yourself,  the  motive  is  good,  but,  ac- 
cording to  a  few  recent  authorities,  if  you  do  not  need  the 
business,  or  do  not  wish  it,  then  the  motive  is  bad;  and  some 
court  may  say  to  a  jury,  who  are  generally  the  triors  of  fact, 
that  a  given  act  of  competition  which  destroyed  A.'s  business 
was  legal  if  the  act  was  prompted  by  a  desire  on  the  part  of 
the  defendant  to  secure  to  himself  the  benefit  of  it,  but  illegal 
if  its  purpose  was  to  destroy  A.'s  business  in  revenge  for  an 
insult  given. 

But  for  the  purpose  of  this  discussion  I  shall  assume  this 
proposition  to  be  sound,  for  it  is  clear  to  me  that,  applying 
that  rule  to  the  facts  found,  it  will  appear  that  the  appellate 
division  order  should  be  sustained. 

While  I  shall  consider  every  fact  found  by  the  learned  trial 
judge,  I  shall  consider  the  findings  in  a  different  order,  be- 
cause it  seems  to  me  the  more  logical  order.  He  finds  "that 
the  defendants.  Gumming  and  Nugent,  while  acting  in  their 
capacity  of  walking  delegates  for  their  respective  associations 
and  members  of  the  board  of  delegates,  caused  the  plaintiff 
McQueed  and  other  members  of  the  plaintiff  association  to 
be  discharged  by  their  employers  from  various  pieces  of  work 
upon  buildings  in  the  course  of  erection  ...  by  threaten- 
ing the  .  .  .  employers  that  if  they  did  not  discharge  the 
members  of  the  plaintiff  association,  and  employ  the  members 
of  the  Enterprise  and  Progress  Associations  in  their  stead, 
the  said  walking  delegates  would  cause  a  general  strike  of  all 
men  of  other  trades  employed  on  said  buildings,  and  that  the 
defendant  Gumming,  as  such  walking  delegate,  did  cause 
strikes  ...  in  order  to  prevent  the  members  of  the 
plaintiff  association  from  continuing  with  the  work  they  were 
doing  at  the  time  the  strike  was  ordered,  and  that  said  em- 


420    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ployers,  by  reason  of  said  threats  and  the  acts  of  the  defendants 
Gumming  and  Nugent,  discharged  the  members  of  the  plain- 
tiff association,  and  employed  the  members  of  the  Enterprise 
and  Progress  Associations  in  their  stead." 

Now  there  is  not  a  fact  stated  in  that  finding  which  is  not 
lawful,  within  the  rules  which  I  have  quoted  supra.  Those 
principles  concede  the  right  of  an  association  to  strike  m 
order  to  benefit  its  members;  and  one  method  of  benefiting 
them  is  to  secure  them  employment, — a  method  conceded  to 
be  within  the  right  of  an  organization  to  employ.  There  is 
no  pretense  that  the  defendant  associations  or  their  walking 
delegates  had  any  other  motive  than  one  which  the  law 
justifies, — of  attempting  to  benefit  their  members  by  securing 
their  employment.  Nowhere  throughout  that  finding  will  be 
found  even  a  hint  that  a  strike  was  ordered,  or  a  notification 
given  of  the  intention  to  order  a  strike,  for  the  purpose  of 
accomplishing  any  other  result  than  that  of  securing  the 
discharge  of  the  members  of  the  plaintiff  association,  and  the 
substitution  of  members  of  the  defendant  associations  in  their 
place.  Such  a  purpose  is  not  illegal  within  the  rules  laid 
down  in  the  opinion  of  Judge  Vann,  nor  within  the  au- 
thorities cited  therein.  On  the  contrary,  such  a  motive  is 
conceded  to  be  a  legal  one.  It  is  only  where  the  sole  purpose 
is  to  do  injury  to  another,  or  the  act  is  prompted  by  malice, 
that  it  is  insisted  that  the  act  becomes  illegal.  No  such  motive 
is  alleged  in  that  finding.  It  is  not  hinted  at.  On  the  con- 
trary, the  motive  which  always  underlies  competition  is  as- 
serted to  have  been  the  animating  one.  It  is  beyond  the  right 
and  the  power  of  this  court  to  import  into  that  finding,  in 
contradiction  of  another  finding  or  otherwise,  the  further 
finding  that  the  motive  which  prompted  the  conduct  of  de- 
fendants was  an  unlawful  one,  prompted  by  malice,  and  a 
desire  to  do  injury  to  plaintiffs,  without  benefiting  the  mem- 
bers of  the  defendant  associations. 

I  doubt  if  it  would  ever  have  occurred  to  any  one  to  claim 
that  there  was  anything  in  that  finding  importing  a  different 
motive  from  that  specially  alleged  in  the  finding,  had  not  the 
draftsman  characterized  the  notice  given  to  the  employers  by 
the  associations  of  their  intention  to  strike  as  "threats." 

The    defendant    associations,  as  appears  from  the  finding 


THE  COMMON  LAW  421 

quoted,  wanted  to  put  their  men  in  the  place  of  certain  men 
at  work  who  were  nonmembers,  working  for  smaller  pay,  and 
they  set  about  doing  it  in  a  perfectly  lawful  way.  They  de- 
termined that  if  it  were  necessary  they  would  bear  the  burden 
and  expense  of  a  strike  to  accomplish  that  result,  and  in  so 
determining  they  were  clearly  within  their  rights,  as  all  agree. 
They  could  have  gone  upon  a  strike  without  offering  any  ex- 
planation until  the  contractors  should  have  come  in  distress  to 
the  officers  of  the  associations,  asking  the  reason  for  the  strike. 
Then,  after  explanations,  the  nomnembers  would  have  been 
discharged,  and  the  men  of  defendant  associations  sent  back  to 
work.  Instead  of  taking  that  course,  they  chose  to  inform  the 
contractors  of  their  determination,  and  the  reason  for  it. 

It  is  the  giving  of  this  information — a  simple  notification  of 
their  determination,  which  it  was  right  and  proper  and  reason- 
able to  give — that  has  been  characterized  as  "threats"  by  the 
special  term,  and  which  has  led  to  no  inconsiderable  amount  of 
misunderstanding  since.  But  the  sense  in  which  the  word  was 
employed  by  the  court  is  of  no  consequence,  for  the  defendant 
associations  had  the  absolute  right  to  threaten  to  do  that  which 
they  had  the  right  to  do.  Having  the  right  to  insist  that  plain- 
tiff's  men  be  discharged,  and  defendants'  men  put  in  their 
place,  if  the  service  of  the  other  members  of  the  organization 
were  to  be  retained,  they  also  had  the  right  to  threaten  that 
none  of  their  men  would  stay  unless  their  members  could  have 
all  the  work  there  was  to  do. 

The  findings  further  stated  that  the  defendants  Gumming 
and  Nugent  were  the  walking  delegates  of  the  defendant  asso- 
ciations, and  as  such  were  members  of  the  board  of  delegates 
of  the  building  trades  in  New  York,  and  were  therefore  in 
control  of  the  matters  in  their  respective  trades.  The  trial 
court  also  found  ' '  that  the  defendant  Gumming  threatened  to 
cause  a  general  strike  against  the  plaintiff  association  and 
against  the  plaintiff  McQueed  wherever  he  found  them  at  work, 
and  that  he  would  not  allow  them  to  work  at  any  job  in  the 
city  of  New  York,  except  some  small  jobs  where  the  men  of  the 
Enterprise  Association  were  not  employed,  and  that  he  and 
the  defendant  Nugent  threatened  to  drive  the  plaintiff  asso- 
ciation out  of  existence. 

Now,  this  finding  should  be  read  in  connection  with  and  in 


422    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  light  of  the  other  findings  which  I  have  already  read  and 
commented  on,  and  which  show  that  the  purpose  of  the  strike 
was  to  secure  the  employment  of  members  of  the  defendant 
associations  in  the  places  filled  by  the  members  of  plaintiff's 
association,  who  were  willing  to  work  for  smaller  wages, — a 
perfectly  proper  and  legitimate  motive  as  we  have  seen.  But 
if  the  other  findings  be  driven  from  the  mind  while  considering 
this  one,  which  the  opinions  of  the  appellate  division  indicate 
was  not  justified  by  the  evidence,  it  will  be  found  that  it  fairly 
means  no  more  than  that  the  defendant  associations  did  not 
purpose  to  allow  McQueed  and  the  members  of  his  association 
to  work  upon  any  jobs  where  members  of  defendant  associa- 
tions were  employed ;  that  they  were  perfectly  willing  to  allow 
them  to  have  smaU  jobs,  fitted,  perhaps,  for  men  who  were 
willing  to  work  for  small  wages,  but  that  the  larger  jobs,  where 
they  could  afford  to  pay  and  would  pay  the  rate  of  wages  de- 
manded by  defendant  associations,  they  intended  to  secure  for 
their  members  alone, — a  determination  to  which  they  had  a 
perfect  right  to  come,  as  is  conceded  by  the  rules  which  I  have 
quoted. 

Having  reached  that  conclusion,  defendants  notified  McQueed, 
who  had  organized  an  association  when  he  failed  to  pass  the 
defendants'  examination,  that  they  would  prevent  him  and  the 
men  of  his  association  from  working  on  a  certain  class  of  jobs. 
They  did  not  threaten  to  employ  any  illegal  method  to  accom- 
plish that  result.  They  notified  them  of  the  purpose  of  the 
defendants  to  secure  this  work  for  themselves,  and  to  prevent 
McQueed  and  his  associates  from  getting  it,  and  in  doing  that 
they  but  informed  them  of  their  intention  to  do  what  they  had 
a  right  to  do ;  and,  when  a  man  purposes  to  do  something  which 
he  has  the  legal  right  to  do,  there  is  no  law  which  prevents 
him  from  telling  another,  who  wiU  be  affected  by  his  act,  of  his 
intention. 

A  man  has  a  right,  under  the  law,  to  start  a  store,  and  to  sell 
at  such  reduced  prices  that  he  is  able  in  a  short  time  to  drive 
the  other  storekeepers  in  his  vicinity  out  of  business,  when, 
having  possession  of  the  trade,  he  finds  himself  soon  able  to 
recover  the  loss  sustained  while  ruining  the  others.  Such  has 
been  the  law  for  centuries.  The  reason,  of  course,  is  that  the 
doctrine  has  generally  been  accepted  that  free  competition  is 


THE  COMI^ION  LAW  4221 

worth  more  to  society  than  it  costs,  and  that  on  this  ground  the 
Infliction  of  damages  is  privileged.  Com.  v.  Hunt,  4  Mete. 
(Mass.)  Ill,  134,  38  Am.  Dec.  346. 

Nor  could  this  storekeeper  be  prevented  from  carrying  out 
his  scheme  because,  instead  of  hiding  his  purpose,  he  openly 
declared  to  those  storekeepers  that  he  intended  to  drive  them 
out  of  business  in  order  that  he  might  later  profit  thereby.  Nor 
would  it  avail  such  storekeepers,  in  the  event  of  their  bringing 
an  action  to  restrain  him  from  accomplishing  their  ruin  by 
underselling  them,  to  persuade  the  trial  court  to  characterize 
the  notification  as  a  ''threat,"  for  on  review  the  answer  would 
be,  "A  man  may  threaten  to  do  that  which  the  law  says  he 
may  do,  provided  that,  within  the  rules  laid  down  in  those 
cases,  his  motive  is  to  help  himself." 

A  labor  organization  is  endowed  with  precisely  the  same  legal 
right  as  is  an  individual  to  threaten  to  do  that  which  it  may 
lawfully  do. 

Having  finished  the  discussion  of  the  facts,  I  reiterate  that, 
VTithin  the  rules  of  law  I  have  quoted,  it  must  appear,  in  order 
to  make  out  a  cause  of  action  against  these  defendants,  that  in 
what  they  did  they  were  actuated  by  improper  motives, — by 
a  malicious  desire  to  injure  the  plaintiffs.  There  is  no  such 
finding  of  fact,  and  there  is  no  right  in  this  court  to  infer  it  if 
it  would,  and  from  the  other  facts  found,  it  is  plain  that  it 
should  not  if  it  could. 

The  findings  conclude  with  a  sentence  which  commences  as 
follows :  ' 'I  find  that  the  threats  made  by  the  defendants,  and 
the  acts  of  the  said  walking  delegates  in  causing  the  discharge 
of  the  members  of  the  plaintiff  association  by  means  of  threats 
of  a  general  strike  of  other  workmen,  constituted  an  illegal 
combination  and  conspiracy."  That  is  not  a  finding  of  fact, 
but  a  conclusion  of  law,  that  the  trial  court  erroneously,  as  I 
think,  attempted  to  draw  from  the  facts  found,  which  I  have 
already  discussed,  and  which  clearly,  in  my  judgment,  require 
this  court  to  hold  that  the  defendants  acted  within  their  legal 
rights. 

In  the  last  analysis  of  the  findings,  therefore,  it  appears  that 
they  declare  that  members  of  the  organizations  refused  to  work 
any  longer,  as  they  lawfully  might;  that  they  threatened  to 
strike,  which  was  also  within  their  lawful  right,  but  without 


424    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

any  suggestion  whatever  in  the  findings  that  they  threatened 
an  illegal  or  unlawful  act.  And  such  findings  are  claimed  to 
he  sufficient  to  uphold  a  judgment  that  absolutely  enjoins  the 
defendant  associations  and  their  members  from  striking.  This 
is  certainly  a  long  step  in  advance  of  any  decision  brought  to 
my  attention, 

I  have  refrained  from  discussing  the  authorities,  because  it 
seemed  unnecessary,  for  the  reason  already  stated  in  this  opin- 
ion. But  it  seems  not  out  of  place  to  suggest  that  the  decisions 
of  the  English  courts  upon  questions  affecting  the  rights  of 
workmen  ought  at  least  to  be  received  with  caution,  in  view 
of  the  fact  that  the  later  ones  are  largely  supported  by  early 
precedents  which  were  entirely  consistent  with  the  policy  of 
the  statute  law  of  England,  but  are  hostile  not  only  to  the 
statute  law  of  this  country,  but  to  the  spirit  of  our  institutions. 
In  support  of  this  view,  reference  to  a  few  early  statutes  of 
England  will  be  made. 

The  statutes  (for  there  are  two)  of  "Labourers,"  passed  in 
1349  and  1350  (23  Edw.  III.  c.  1,  and  25  Edw.  III.  stat.  1), 
provided  "that  every  man  and  woman  of  what  condition  he 
be,  free  or  bond,  able  in  body,  and  within  the  age  of  three  score 
years;"  and  not  having  means  of  his  own,  "if  he  in  convenient 
service  (his  estate  considered)  be  required  to  serve,  he  shall  be 
bounden  to  serve  him  which  so  shall  him  require."  And  the 
statutes  provide  that,  in  case  of  refusal  to  serve,  punishment  by 
imprisonment  might  be  inflicted,  and  that  the  laborer  should 
take  the  customary  rate  of  wages,  and  no  more.  These  statutes 
not  only  regulated  the  wages  of  laborers  and  mechanics,  but 
they  confined  them  to  their  existing  places  of  residence,  and 
required  them  to  swear  to  obey  the  provisions  of  the  statutes. 
Sir  James  Fitzjames  Stephen,  in  his  History  of  the  Criminal 
Law  of  England  (volume  3,  p.  204),  says,  "The  main  object  of 
these  statutes  was  to  check  the  rise  in  wages  consequent  upon 
the  great  pestilence  called  the  'Black  Death.'  " 

Nearly  200  years  later,  and  in  1548,  a  more  general  statute 
was  passed,  which  forbade  all  conspiracies  and  covenants  of 
artificers,  workmen,  or  laborers  "not  to  make  or  do  their  work 
but  at  a  certain  price  or  rate,"  or  for  other  similar  purj>oses, 
under  the  penalty,  on  a  third  conviction,  of  the  pillory  and  loss 


THE  COi\BION  LAW  425 

of  an  ear,  and  to  "be  taken  as  a  man  'infamous.'  "  2  &  3  Edw. 
VI.  c.  15. 

Fourteen  years  later  the  prior  statutes  were  to  some  extent 
amended  and  consolidated  into  a  longer  act,  entitled  "An  act 
containing  divers  orders  for  artificers,  laborers,  servants  of 
husbandry,  and  apprentices."  It  provided,  in  effect,  that  all 
persons  able  to  work  as  laborers  or  artificers,  and  not  possessed 
of  independent  means  or  other  employments,  are  bound  to  work 
as  artificers  or  laborers  on  demand.  The  hours  of  work  are 
fixed;  power  is  given  to  the  justices  in  their  next  session  after 
Easter  to  fix  the  wages  to  be  paid  to  mechanics  and  laborers; 
elaborate  rules  are  laid  down  as  to  apprenticeship ;  and  it  fur- 
ther provides  that  for  the  future  no  one  is  to  "set  up,  occupy, 
use  or  exercise  any  craft,  mystery  or  occupation  now  used" 
until  he  has  served  an  apprenticeship  of  seven  years.  5  Eliz. 
c.  4.  This  statute  remained  in  force  practically  for  a  long 
period  of  time,  and  was  not  formally  repealed  until  the  year 
1875. 

In  the  year  1720  an  act  was  passed  declaring  all  agreements 
between  journeymen  tailors  "for  advancing  their  wages,  or  for 
lessening  their  usual  hours  of  work"  to  be  null  and  void,  and 
subjecting  persons  entering  into  such  an  agreement  to  imprison- 
ment, with  or  without  hard  labor,  for  two  months.  7  Geo.  I. 
stat.  1,  c.  13.  Similar  enactments  were  passed  as  to  employes 
in  other  manufactures  and  trades. 

The  act  of  1800  (40  Geo.  m.  c.  106)  provided  for  a  penalty 
of  three  months'  imprisonment  without  hard  labor,  or  two 
months  with  hard  labor,  for  every  journeyman,  workman,  or 
other  person  who  "enters  into  any  combination  to  obtain  an 
advance  of  wages,  or  lessen  or  alter  the  hours  of  work  .  .  . 
or  who  hinders  any  employer  from  employing  any  person  as 
he  thinks  proper,  or  who  being  hired  refuses  without  any  just 
or  reasonable  cause  to  work  with  any  other  journeyman  or 
workman  employed  or  hired  to  work."  The  same  penalty  is 
inflicted  upon  persons  who  attend  meetings  held  for  the  purpose 
of  collecting  money  to  further  such  effort,  and  the  act  also 
makes  it  an  offense  to  assist  in  maintaining  men  who  are  on 
strike.  This  statute,  as  well  as  the  others  referred  to,  have  at 
last  been  swept  away,  but  necessarily  their  influence  has  been 


426    COIklBINATIONS  AND  RESTRAINT  OF  TRADE 

not  inconsiderable  in  shaping  the  decisions  of  the  courts  of 
England. 

The  order  should  be  affirmed,  and  judgment  absolute  ordered 
for  defendants  on  the  plaintiffs'  stipulation,  with  costs. 

GRAY,  J.  I  express  my  concurrence  with  the  conclus-ion 
which  has  been  reached  by  the  Chief  Judge  in  his  opinion, — 
that  the  order  of  the  appellate  division  should  be  affirmed. 

Briefly  stated,  my  view  is  that  the  respondents  had  the  legal 
right  to  accomplish  their  object  by  all  methods  not  condemned 
by  the  law.    That  object  was  to  secure  the  employment  of  the 
members  of  their  own  association  in  preference  to,  and  to  the 
exclusion  of,  those  of  the  appellant  association.    They  infringed 
upon  no  law  in  declaring  to  the  employers  of  members  of  the 
appellant  organization  that  they  refused  to  work  with  them, 
or  that  they  would  abandon  their  work  unless  the  others  were 
discharged,   or  in  preventing  the  members  of  the   appellant 
association  from  being  employed  as  steam  fitters.    The  case  is 
not  within  the  principle  of  Curran  v.  Galen,  152  N.  Y.  33. 
Upon  the  facts  of  that  case,  as  they  were  admitted  by  the 
demurrer  to  the  complaint,  the  plaintiff  was  threatened,  if  he 
did  not  join  a  certain  labor  organization,  and  so  long  as  be 
refused  to  do  so,  with  such  action  as  would  result  in  his  dis- 
charge from  employment,  and  in  an  impossibility  for  him  to 
obtain  other  employment  anywhere;  and,  in  consequence  of 
continuing  his  refusal  to  join  the  organization,  his  discharge 
was  procured  through  false  and  malicious  reports  affecting  his 
reputation  with  members  of  his  trade   and  with  employers. 
There  is  no  such  compulsion  or  motive  manifest  here.    There  is 
no  malice  found.     There  is  no  threat  of  a  resort  to  illegal 
methods.    We  may  assume  (and  the  evidence  would  justify  the 
assumption)  that  the  action  of  the  respondents  was  based  upon 
a  proper  motive,   relating   to  the   employment  of  mechanics 
whose  competency  and  efficiency  had  been  examined  into  and 
approved.    The  contest  is  between  rival  labor  organizations,  it 
is  true.     The  respondents  have  succeeded,  through  the  threat 
that  other  workmen  would  leave  their  work  if  the  members  of 
the  appellant  organization  were  not  discharged,  in  procuring 
the  employment  of  the  members  of  their  own  association.    But 
no  unlawful  means  were  taken,  nor  were  any  illegal  acts  com- 


THE  COMMON  LAW  427 

mitted  in  bringing  about  that  result.  It  was  not  an  effort  to 
compel  the  members  of  the  appellant  organization  to  join  the 
respondents'  association,  as  a  condition  of  being  allowed  to 
work.  There  is  no  finding  to  that  effect.  On  the  contrary,  it 
appears  that  the  appellant  McQueed,  having  failed  to  pass  the 
required  examination  to  become  a  qualified  member  of  the  re- 
spondents' association,  proceeded  to  organize  an  association  of 
his  own.  Regarded  either  as  an  effort  to  secure  only  the  em- 
ployment of  efficient  and  approved  workmen,  or  as  a  mere 
struggle  for  exclusive  preference  of  employment  on  their  own 
terms  and  conditions,  from  either  standpoint  how  can  it  be 
said  to  be  within  the  condemnation  of  the  law  or  of  any  statute, 
when  there  was  no  force  employed,  nor  any  unlawful  act  com- 
mitted? Our  laws  recognize  the  absolute  freedom  of  the  in- 
dividual to  work  for  whom  he  chooses,  with  whom  he  chooses, 
and  to  make  any  contract  upon  the  subject  that  he  chooses. 
There  is  the  same  freedom  to  organize,  in  an  association  with 
others  of  his  craft,  to  further  their  common  interests  as  work- 
ingmen,  with  respect  to  their  wages,  to  their  hours  of  labor,  or 
to  matters  affecting  their  health  and  safety.  They  are  free  to 
secure  the  furtherance  of  their  common  interests  in  every  way 
which  is  not  within  the  prohibition  of  some  statute,  or  which 
does  not  involve  the  commission  of  illegal  acts.  The  struggle 
on  the  part  of  individuals  to  prefer  themselves,  and  to  prevent 
the  work  which  they  are  fitted  to  do  from  being  given  to  others, 
may  be  keen,  and  may  have  unhappy  results  in  individual 
cases ;  but  the  law  is  not  concerned  with  such  results,  when  not 
caused  by  illegal  means  or  acts. 

I  concur  with  the  Chief  Judge  in  his  analysis  of  the  decision 
of  the  trial  court,  and  that  the  facts  as  therein  stated  do  not 
compel  the  legal  conclusion  which  the  learned  trial  judge 
reached. 

I  vote  for  the  affirmance  of  the  order  of  the  appellate  division. 

VANN,  J.  (dissenting).  The  National  Protective  Association 
of  Steam  Fitters  and  Helpers  is  a  domestic  corporation  organ- 
ized to  furnish  competent  steam  fitters  and  helpers  in  all 
branches  to  the  general  public,  to  protect  its  members  in  the 
pursuit  of  that  business,  and  for  other  purposes.  The  plaintiff, 
Charles  McQueed,  is  a  member  of  that  corporation,  and  sues 


428    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

for  the  benefit  of  himself  and  his  fellow  members.  The  de- 
fendant 0  'Brien  is  the  president  of  the  board  of  delegates ;  the 
defendant  Duff  is  the  treasurer  of  the  Enterprise  Association  of 
Steam  Fitters;  the  defendant  Mallaney  is  the  treasurer  of  the 
Progress  Association  of  Steam  Fitters  and  Helpers;  the  de- 
fendant Gumming  is  an  officer  known  as  the  "walking  dele- 
gate" of  the  Enterprise  Association;  the  defendant  Nugent  is 
the  walking  delegate  of  the  Progress  Association;  and  both 
Gumming  and  Nugent  are  ex  officio  members  of  the  board  of 
delegates.  Each  of  these  associations  is  unincorporated,  and 
consists  of  more  than  seven  members. 

This  action  is  brought  to  restrain  the  defendants  from  pre- 
venting the  employment  of  the  plaintiif  corporation  or  its 
members,  and  from  coercing  their  discharge  by  any  employer 
through  threats,  strikes  or  otherwise,  and  to  recover  damages, 
with  other  relief. 

The  issues  joined  by  the  answers  of  the  several  defendants 
were  tried  at  special  term.  The  trial  justice  adopted  the  short 
form  of  decision,  but,  in  stating  the  grounds  upon  which  he 
proceeded,  found  specifically  "that  the  defendants  have  en- 
tered into  a  combination  which,  in  effect,  prevents,  and  will 
continue  to  prevent,  the  plaintiff  McQueed  and  the  other  mem- 
bers of  the  plaintiff  association  from  working  at  his  or  their 
trade  in  the  city  of  New  York;  .  .  .  that  the  defend- 
ant Gumming  threatened  to  cause  a  general  strike  against 
the  plaintiff  association  and  against  the  plaintiff  McQueed 
wherever  he  found  them  at  work,  and  that  he  would  not 
allow  them  to  work  at  any  job  in  the  city  of  New  York, 
except  some  small  jobs  where  the  men  of  the  Enterprise 
Association  were  not  employed,  and  that  he  and  the  defendant 
Nugent  threatened  to  drive  the  plaintiff  association  out  of 
existence ;  .  .  .  that  the  defendants  Gumming  and  Nugent, 
while  acting  in  their  capacity  of  walking  delegates  for  their 
respective  associations,  and  members  of  the  board  of  dele- 
gates, caused  the  plaintiff  McQueed  and  other  members  of  the 
plaintiff  association  to  be  discharged  by  their  employers  from 
various  places  of  work  upon  buildings  in  the  course  of  erection 
by  [naming  three  different  employers  who  were  erecting  build- 
ings at  different  places  in  the  boroughs  of  Brooklyn  and  Man- 
hattan], by  threatening  the  said  employers  that  if  they  did  not 


THE  COMMON  LAW  429 

discharge  the  members  of  the  plaintiff  association,  and  employ 
the  members  of  the  Enterprise  I*rogress  Association  in  their 
stead,  the  said  walking  delegates  would  cause  a  general  strike 
of  all  men  of  other  trades  employed  on  said  buildings,  and  that 
the  defendant  Gumming,  as  such  walking  delegate,  did  cause 
strikes  ...  in  order  to  prevent  the  members  of  the  plain- 
tiff association  from  continuing  with  the  work  they  were  doing 
at  the  time  the  strike  was  ordered,  and  that  the  said  employers, 
by  reason  of  said  threats  and  the  acts  of  the  defendants  Cum^ 
ming  and  Nugent,  discharged  the  members  of  the  plaintiff  asso- 
ciation, .  .  .  and  employed  the  members  of  the  Enterprise 
and  Progress  Associations  in  their  stead;  .  .  .  that  the 
threats  made  by  the  defendants,  and  the  acts  of  said  walking 
delegates  in  causing  the  discharge  of  the  members  of  the  plain- 
tiff association  by  means  of  threats  of  a  general  strike  of  other 
working  men,  constituted  an  illegal  combination  and  conspir- 
acy, injured  the  plaintiff  association  in  its  business,  deprived 
its  members  of  employment  and  an  opportunity  to  labor,  pre- 
vented them  from  earning  their  livelihood  in  their  trade  or 
business.     .     .     . 

A  judgment  was  directed  and  entered  restraining  the  defend- 
ants from  "preventing  the  work,  business,  or  employment  of 
the  plaintiff  corporation,  or  any  of  its  members,  in  the  city  of 
New  York  or  elsewhere,  and  from  coercing  or  obtaining,  by 
command,  threats,  strikes,  or  otherwise,  the  dismissal  or  dis- 
charge by  any  employer,  contractor,  or  owner  of  the  members 
of  the  plaintiff  corporation,  or  the  plaintiff  McQueed,  or  any  or 
either  of  them,  from  their  work,  employment,  or  business,  or  in 
any  wise  interfering  with  the  lawful  business  or  work  of  the 
plaintiff  corporation  or  of  its  members.  But  the  defendants 
are  not,  nor  is  any  one  of  them,  enjoined  and  restrained  from 
refusing  to  work  with  the  plaintiff  or  any  member  of  the  plain- 
tiff corporation." 

The  appellate  division,  according  to  its  order,  which  is  the 
only  evidence  of  its  action  that  we  can  consider,  did  not  reverse 
upon  a  question  of  fact ;  and  a  reversal  upon  the  law,  only,  is  an 
affirmance  of  the  facts  found,  which  are  thus  placed  beyond  our 
control,  as  there  was  some  evidence  to  support  the  findings. 
People  V.  Adirondack  Ry.  Co.,  160  N.  Y.  225,  235;  Code  Civ. 
Proc.  8  1338. 


430    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Thus  we  have  before  us  a  controversy,  not  between  employer 
and  employe,  but  between  different  labor  organizations, 
wherein  one  seeks  to  restrain  the  others  from  driving  its  mem- 
bers out  of  business,  and  absolutely  preventing  them  from 
earning  a  living  by  working  at  their  trade,  through  threats, 
made  to  the  common  employer  of  members  of  all  the  organiza- 
tions, to  destroy  his  business  unless  he  discharged  the  plaintiff's 
members  from  his  employment. 

The  primary  question  is  whether  the  action  of  the  defendants 
was  unlawful,  for  a  lawful  act  done  in  a  lawful  manner  cannot 
cause  actionable  injury.  It  is  not  the  duty  of  one  man  to  work 
for  another  unless  he  has  agreed  to,  and  if  he  has  so  agreed, 
but  for  no  fixed  period,  either  may  end  the  contract  whenever 
he  chooses.  The  one  may  work  or  refuse  to  work  at  will,  and 
the  other  may  hire  or  discharge  at  will.  The  terms  of  employ- 
ment are  subject  to  mutual  agreement,  without  let  or  hindrance 
from  any  one.  If  the  terms  do  not  suit,  or  the  employer  does 
not  please,  the  right  to  quit  is  absolute,  and  no  one  may  demand 
a  reason  therefor-.  Whatever  one  man  may  do  alone,  he  may 
do  in  combination  with  others,  provided  they  have  no  unlawful 
object  in  view.  Mere  numbers  do  not  ordinarily  affect  the 
quality  of  the  act. 

Workingmen  have  the  right  to  organize  for  the  purpose  of 
securing  higher  wages,  shorter  hours  of  labor,  or  improving 
their  relations  with  their  employers.  They  have  the  right  to 
strike  (that  is,  to  cease  working  in  a  body  by  prearrangement 
until  a  grievance  is  redressed),  provided  the  object  is  not  to 
gratify  malice,  or  inflict  injury  upon  others,  but  to  secure  better 
terms  of  employment  for  themselves.  A  peaceable  and  orderly 
strike,  not  to  harm  others,  but  to  improve  their  own  condition, 
is  not  a  violation  of  law.  They  have  the  right  to  go  farther, 
and  to  solicit  and  persuade  others,  who  do  not  belong  to  their 
organization,  and  are  employed  for  no  fixed  period,  to  quit 
work,  also,  unless  the  common  employer  of  all  assents  to  lawful 
conditions,  designed  to  improve  their  material  welfare.  They 
have  no  right,  however,  through  the  exercise  of  coercion,  to 
prevent  others  from  working.  When  persuasion  ends,  and 
pressure  begins,  the  law  is  violated ;  for  that  is  a  trespass  upon 
the  rights  of  others,  and  is  expressly  forbidden  by  statute. 
Pen.  Code,  §  168.     They  have  no  right,  by  force,  threats,  or 


THE  COMMON  LAW  431 

intimidation,  to  prevent  members  of  another  labor  organization 
from  working,  or  a  contractor  from  hiring  them  or  continuing 
them  in  his  employment  They  may  not  threaten  to  cripple  his 
business  unless  he  will  discharge  them,  for  that  infringes  upon 
liberty  of  action,  and  violates  the  right  which  every  man  has 
to  conduct  his  business  as  he  sees  fit,  or  to  work  for  whom  and 
on  what  terms  he  pleases.  Their  labor  is  their  property,  to  do 
with  as  they  choose ;  but  the  labor  of  others  is  their  property, 
in  turn,  and  is  entitled  to  protection  against  wrongful  inter- 
ference. Both  may  do  what  they  please  with  their  own,  but 
neither  may  coerce  another  into  doing  what  he  does  not  wish 
to  with  his  own.  The  defendant  associations  made  their  own 
rules  and  regulations,  and  the  plaintiff  corporation  did  the 
same.  Neither  was  entitled  to  any  exclusive  privilege,  but  both 
had  equal  rights  according  to  law.  The  defendants  could  not 
drive  the  plaintiff's  members  from  the  labor  market  absolutely, 
and  the  plaintiff  could  not  drive  the  defendants'  members 
therefrom.  The  members  of  each  organization  had  the  right  to 
follow  their  chosen  calling  without  unwarrantable  interference 
from  others.  I*ublic  policy  requires  that  the  wages  of  labor 
should  be  regulated  by  the  law  of  competition  and  of  supply 
and  demand,  the  same  as  the  sale  of  food  or  clothing.  Any 
combination  to  restrain  "the  free  pursuit  in  this  state  of  any 
lawful  business,"  in  order  "to  create  or  maintain  a  monopoly," 
is  expressly  prohibited  by  statute,  and  an  injunction  is  author- 
ized to  prevent  it.  In  re  Davies,  168  N.  Y.  89,  96 ;  Laws  1897, 
c.  383 ;  Laws  1899,  c.  690. 

A  combination  of  workmen  to  secure  a  lawful  benefit  to 
themselves  should  be  distinguished  from  one  to  injure  other 
workmen  in  their  trade.  Here  we  have  a  conspiracy  to  injure 
the  plaintiffs  in  their  business,  as  distinguished  from  a  legiti- 
mate advancement  of  the  defendants'  own  interests.  While 
they  had  the  right  by  fair  persuasion  to  get  the  work  of  the 
plaintiff  McQueed,  for  instance,  they  had  no  right,  either  by 
force  or  by  threats,  to  prevent  him  from  getting  any  work 
whatever,  or  to  deprive  him  of  the  right  to  earn  his  living  by 
plying  his  trade.  Competition  in  the  labor  market  is  lawful, 
but  a  combination  to  shut  workmen  out  of  the  market  alto- 
gether is  unlawful.  One  set  of  laborers,  whether  organized  or 
not,  has  no  right  to  drive  another  set  out  of  business,  or  prevent 


432    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

them  from  working  for  any  person  upon  any  terms  satisfactory 
to  themselves.  By  threatening  to  call  a  general  strike  of  the 
related  trades,  the  defendants  forced  the  contractor  to  dis- 
charge competent  workmen  who  wanted  to  work  for  him,  and 
whom  he  wished  to  keep  in  his  employment.  They  conspired 
to  do  harm  to  the  contractor  in  order  to  compel  him  to  do  harm 
to  the  plaintiffs,  and  their  acts  in  execution  of  the  consph-acy 
caused  substantial  damage  to  the  members  of  the  plaintiff  cor- 
poration. While  no  physical  force  was  used,  the  practical 
effect  was  that  members  of  one  labor  organization  drove  the 
members  of  another  labor  organization  out  of  business,  and 
deprived  them  of  the  right  to  labor  at  their  chosen  vocation. 
Depriving  a  mechanic  of  employment  by  unfair  means  is  the 
same  in  principle  as  depriving  a  tradesman  of  his  customers  by 
unfair  means,  which  has  always  been  held  a  violation  of  law. 

A  conspiracy  is  a  combination  to  do  an  illegal  act  by  legal 
means,  or  any  act  by  illegal  means.  Here  the  means  used  were 
illegal,  because  they  tended  and  were  designed  to  injure-  a 
man  in  his  business  without  lawful  excuse.  A  threat,  whether 
made  by  one  alone,  or  by  many  acting  in  combination,  to  injure 
a  man  in  his  business  unless  he  will  conduct  it  in  a  way  that  he 
does  not  wish  to,  is  a  tortious  act,  because  it  interferes  with 
business  freedom;  and  if  it  results  in  injury  it  is  actionable. 
Every  man  has  the  right  to  carry  on  his  business  in  any  lawful 
way  that  he  sees  fit.  He  may  employ  such  men  as  he  pleases, 
and  is  not  obliged  to  employ  those  whom,  for  any  reason,  he 
does  not  wish  to  have  work  for  him.  He  has  the  right  to  the 
utmost  freedom  of  contract  and  choice  in  this  regard,  and 
interference  with  that  freedom  is  against  public  policy,  because 
it  tends  not  only  to  destroy  competition,  but,  in  a  broad  sense, 
to  deprive  a  man  of  both  liberty  and  property.  People  v.  Gill- 
son,  109  N.  Y.  389,  399,  4  Am.  St.  Rep.  465 ;  Slaughter  House 
Cases,  16  Wall.  116, 122,  21  L.  Ed.  394.  Threatening,  molesting, 
intimidating,  and  obstructing  others  in  their  trade  or  calling  is 
contrary  to  law,  because  it  is  in  violation  of  personal  rights,  in 
restraint  of  trade,  and  injurious  to  society.  It  tends  to  force 
able-bodied  and  competent  workmen  into  idleness,  and  prevent 
them  from  helping  to  do  the  work  of  the  country.  Workmen 
cannot  dictate  to  employers  how  they  shall  carry  on  their  busi- 
ness, nor  whom  they  shall  or  shall  not  employ.    The  plaintiff's 


THE  COMMON  LAW  433 

men  had  the  right  to  work  without  molestation  by  members  of 
other  labor  unions,  exercised  either  directly  against  them- 
selves, or  indirectly  through  their  employers.  They  had  the 
right  to  have  their  relations  with  their  employers  left  undis- 
turbed, and  this  right  was  intentionally  invaded  by  the  de- 
fendants, without  lawful  justification.  The  object  was  evil,  for 
it  was  not  to  compete  for  employment  by  fair  means,  but  to 
exclude  rivals  from  employment  altogether  by  unfair  means. 
The  law  gives  all  men  an  equal  chance  to  live  by  their  own 
labor,  and  does  not  permit  one  labor  union  to  seize  all  the 
chances,  by  compelling  employers  to  refuse  employment  to  the 
members  of  all  other  unions.  The  plaintiffs  do  not  ask  for 
protection  against  competition,  but  from  "malicious  and  op- 
pressive interference ' '  Avith  their  right  to  work  at  their  trade. 

The  object  of  the  defendants  was  not  to  get  higher  wages, 
shorter  hours,  or  better  terms  for  themselves,  but  to  prevent 
others  from  following  their  lawful  calling.  Thus  one  of  the 
defendants  said  to  the  plaintiff  McQueed :  "I  will  strike  against 
your  men  wherever  I  find  them,  and  not  allow  them  to  work 
on  any  job  in  the  city,  except  some  small  place  where  the 
Enterprise  men  are  not  employed." 

The  same  man  said  to  one  of  the  contractors  that  he  could 
not  have  the  plaintiff's  men  in  his  employment,  and  unless  they 
were  discharged  he  would  order  a  "general  strike  of  the  whole 
building."  They  were  discharged  accordingly,  although  the 
contractor  testified  that  they  were  good  workmen,  that  their 
work  was  satisfactory,  and  that  he  had  no  reason  for  dis- 
charging them,  other  than  the  threats  made.  Another  con- 
tractor testified  that  two  of  the  defendants  told  him  that  he 
must  take  the  plaintiff's  men  off  and  put  their  men  on,  "or  else 
the  whole  building  would  be  tied  up,  as  they  would  not  allow 
the  other  men  to  work."  The  usual  discharge  followed,  al- 
though the  men  were  satisfactory  to  their  employer.  The  same 
witness  testified  that  "Mr.  Gumming  would  neither  allow  my 
men  to  work,  nor  would  he  allow  his  men  to  go  to  work  until 
the  time  had  been  paid  for  between  the  interval  they  struck 
and  the  time  they  were  to  go  to  work  again." 

A  member  of  the  plaintiff  corporation  swore  that  "Mr.  Gum- 
ming told  us  that,  if  he  ever  found  us  on  a  job  in  the  vicinity 
of  New  York,  he  would  strike  it  by  order  of  the  board  of  dele- 

Kalea  K.  of  T.  Vol,  1—28 


434    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

gates.  lie  said  they  would  not  allow  us  to  work  on  any  job, 
except  it  was  a  small  job, — a  cheap  job, — and  he  allowed  us  to 
do  it."  The  threat  was  repeated  in  substance  to  the  employer, 
who  discharged  the  witness,  and  he  was  not  employed  on  the 
building  afterward. 

There  was  other  evidence  to  the  same  effect,  and,  although 
the  defendants  denied  making  these  threats,  the  trial  judge 
accepted  the  version  of  the  plaintiff's  witnesses,  and  hence  we 
must  do  the  same.  I  assume,  therefore,  that  the  defendants 
caused  the  discharge  of  the  plaintiff's  men  by  threatening  to 
cripple  their  employer's  business  unless  he  discharged  them, 
and  that  they  also  molested  them  by  threatening  to  prevent 
them  from  working  at  their  trade  in  the  city  of  New  York,  by 
calling  a  general  strike  of  all  trades  on  any  building  where 
they  might  be  employed.  The  action  of  the  defendants  was 
wrongful  and  malicious,  and  their  object  was  to  force  men  who 
had  learned  a  trade  to  abandon  it  and  take  up  some  other  pur- 
suit. There  is  no  finding  that  the  defendants  maintain  a  higher 
standard  of  skill  than  the  plaintiffs. 

It  may  be  argued  that  the  employers  were  not  obliged  to 
yield  to  these  threats,  and  this  is  true;  but  noncompliance 
meant  ruin  to  them,  for  their  work  would  be  completely  tied 
up  and  their  business  paralyzed.  A  threat,  with  ruin  behind 
it,  may  be  as  coercive  as  physical  force.  The  effect  of  such 
threats  upon  men  of  ordinary  nerve  is  well  known.  They  could 
not  perform  their  contracts,  and  would  thus  be  subjected  to 
great  loss.  Hence,  against  their  will,  they  yielded  to  unlawful 
demands.  Personal  liberty  was  interfered  with  through  coer- 
cion of  the  will.  Some  of  them  knew  from  experience,  as  the 
record  shows,  that  the  military  discipline  of  the  defendant 
organizations  practically  compelled  instant  obedience  of  an 
order  to  strike.  When  an  association  is  so  strong  and  its  dis- 
cipline so  perfect  that  its  orders  to  strike  are  equivalent  to  the 
commands  of  an  absolute  monarch,  the  effect  is  the  same  as  the 
use  of  physical  force.  1  Tied.  Cont.  Pers.  &  Prop.  p.  433 ;  Erie, 
Trade  Unions,  12,  105. 

The  purposes  of  the  defendants,  as  well  as  the  methods  pur- 
sued by  them,  were  unlawful,  and  authorized  the  injunction 
granted  by  the  trial  court  in  order  to  prevent  irreparable  in- 
jury and  a  multiplicity  of  suits.    This  was  conceded  in  Reynolds 


THE  COmiON  LAW  435 

V.  Everett,  144  N.  Y.  189,  and  demonstrated  in  Davis  v.  Zim- 
merman, 91  Hun,  489.  Each  man  would  be  compelled  to  bring 
a  separate  action  every  time  he  was  discharged.  An  action  at 
law,  especially  against  an  unincorporated  association,  would 
ordinarily  do  no  good,  and  in  most  cases  ruin  would  anticipate 
relief.  Damages  would  not  adequately  redress  the  wrong,  and 
the  mere  statement  of  the  facts  shows  the  impossibility  of 
adequately  measuring  the  damages  in  this  class  of  actions. 
That  damages  were  sustained  is  clear,  but  what  evidence  can 
prove  the  amount,  and  what  intelligence  is  keen  enough  to 
resolve  them  into  dollars  and  cents?  Unless  equity  will  take 
jurisdiction,  the  wrong  done  is  practically  without  a  remedy. 
Unlawful  combinations  of  capital  are  restrained  without  hesi- 
tation, and  the  same  test  of  illegality  should  be  applied  to  com- 
binations of  labor;  for  both  are  equal  before  the  law,  and  both 
are  covered  by  the  same  statute  (Laws  1897,  c.  383;  Laws 
1899,  c.  690).  The  prejudice  said  to  exist  in  some  minds 
against  interference  by  courts  of  equity  in  labor  disputes 
should  not  be  heeded ;  for  if,  upon  well-settled  principles,  the 
courts  have  jurisdiction,  they  must  exercise  it,  or  refuse  to  do 
their  duty.  Public  opinion  may  express  itself  in  legislation, 
but  not  in  judicial  decisions. 

The  fact  that  a  lawful  strike  Luflicts  injury  upon  the  em- 
ployer is  not  controlling.  As  was  said  by  a  recent  writer  upon 
the  subject:  "The  courts  recognize  the  right  of  workingmen 
to  combine  together  for  the  purpose  of  bettering  their  condi- 
tion, and,  in  endeavoring  to  attain  their  object,  they  may 
inflict  more  or  less  inconvenience  and  damages  upon  the  em- 
ployer; but  a  threat  to  strike  unless  their  wages  are  advanced 
is  something  very  difi^erent  from  a  threat  to  strike  unless 
workmen  who  are  not  members  of  the  combination  are  dis- 
charged. In  either  case  the  inconvenience  and  damage  inflicted 
upon  the  employer  is  the  same ;  but  in  the  one  case  the  means 
used  are  to  attain  a  legitimate  purpose,  namely,  the  advance- 
ment of  their  own  wages,  and  the  injury  inflicted  is  no  more 
than  is  lawfully  incidental  to  the  enjoyment  of  their  own  legal 
rights.  In  the  other  case  the  object  sought  is  the  injury  of  a 
third  party;  and  while  it  may  be  argued  that  indirectly  the 
discharge  of  the  nonunion  employe  will  strengthen  and  benefit 
the  union,  and  thereby  indirectly  benefit  the  union  workmen, 


436    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  benefit  to  the  members  of  the  combination  is  so  remote,  as 
compared  to  the  direct  and  immediate  injury  inflicted  upon 
the  nonunion  workmen,  that  the  law  does  not  look  beyond  the 
immediate  loss  and  damage  to  the  innocent  parties,  to  the 
remote  benefits  that  might  result  to  the  union,"  1  Eddy, 
Comb'ns,  416. 

The  conclusions  I  have  announced  are  supported  by  the 
weight  of  authority  in  this  country  and  in  England.  The 
leading  case  in  this  state  is  controlling  in  principle,  and  re- 
quires a  reversal  of  the  order  appealed  from.  Curran  v.  Galen, 
152  N,  Y.  33.  The  plaintiff  in  that  case  alleged  in  his  com- 
plaint that  the  defendants  wrongfully  conspired  to  injure  him 
and  take  away  his  means  of  earning  a  livelihood;  that  they 
threatened  to  accomplish  this  unless  he  would  join  their  asso- 
ciation; that  in  pursuance  of  the  conspiracy,  "upon  plaintiff's 
refusing  to  become  a  member  of  said  association,"  the  de- 
fendants "made  complaint  to  the  plaintiff's  employers,  and 
forced  them  to  discharge  him  from  their  employ,  and  by 
false  and  malicious  reports  in  regard  to  him,  sought  to  bring 
him  into  ill  repute  with  members  of  his  trade  and  employers, 
and  to  prevent  him  from  prosecuting  his  trade  and  earning 
a  livelihood."  The  answer  set  forth  an  agreement  between 
a  brewer's  association  and  a  labor  organisation,  of  which  de- 
fendants were  members,  to  the  effect  that  all  employes  of  the 
brewery  companies  belonging  to  the  former  should  be  members 
of  the  latter,  and  that  no  employe  should  work  for  a  longer 
period  than  four  weeks  without  becoming  a  member.  It  was 
further  alleged  that  the  plaintiff  was  retained  in  the  employ- 
ment of  one  of  the  brewing  companies  for  more  than  four 
weeks  after  he  was  notified  of  the  provisions  of  said  agreement 
requiring  him  to  become  a  member  of  the  local  assembly ;  that 
the  defendants  requested  him  to  become  a  member,  and,  on  his 
refusal  to  comply,  they,  through  their  committee,  notified  the 
officers  of  said  company  that  the  plaintiff,  after  repeated  re- 
quests, had  refused  for  more  than  four  weeks  to  become  a 
member  of  said  assembly;  and  that  they  did  so  solely  in  pur- 
suance of  said  agreement,  and  in  accordance  with  the  terms 
thereof,  without  intent  or  purpose  to  injure  plaintiff  in  any  way. 

The  plaintiff  demurred  to  this  defense  upon  the  ground  that 
it  was  insufficient,  in  law,  upon  the  face  thereof.    The  demurrer 


THE  C0]\OI0N  LAW  437 

was  sustained  in  all  the  courts.  77  Hun,  610,  152  N.  Y.  33. 
All  the  judges  who  sat  in  this  court  united  with  Judge  Gray- 
in  saying  that:  "Public  policy  and  the  interests  of  society 
favor  the  utmost  freedom  in  the  citizen  to  pursue  his  lawful 
trade  or  calling,  and  if  the  purpose  of  an  organization  or  com- 
bination of  workingmen  be  to  hamper  or  to  restrict  that  free- 
dom, and,  through  contracts  or  arrangements  with  employers, 
to  coerce  other  workingmen  to  become  members  of  the  organ- 
ization, and  to  come  under  its  rules  and  conditions,  under  the 
penalty  of  the  loss  of  their  position  and  of  deprivation  of 
employment,  then  that  purpose  seems  clearly  unlawful,  and 
militates  against  the  spirit  of  our  government  and  the  nature 
of  our  institutions.  The  effectuation  of  such  a  purpose  would 
conflict  with  that  principle  of  public  policy  which  prohibits 
monopolies  and  exclusive  privileges.  It  would  tend  to  deprive 
the  "public  of  the  services  of  men  in  useful  employment  and 
capacities.  It  would,  to  use  the  language  of  Mr.  Justice  Bar- 
rett in  People  v.  Smith,  5  N.  Y.  Cr.  R.,  at  page  513,  'im- 
poverish and  crush  a  citizen  for  no  reason  connected  in  the 
slightest  degree  with  the  advancement  of  wages  or  the  main- 
tenance of  the  rate.'  " 

The  plaintiff,  in  a  very  recent  case  in  England,  employed 
nonunion  men,  and  after  trying  in  vain  to  have  them  admitted 
to  the  union,  was  told  by  its  president  that  unless  he  discharged 
them  his  meat  would  be  stopped  at  one  Munce's,  who  had 
been  getting  about  £30  worth  weekly  from  him  for  20  years, 
although  there  was  no  permanent  contract  between  them. 
Upon  his  refusing  to  discharge,  the  defendants,  who  were 
officers  and  members  of  the  union,  threatened  to  instruct 
Munce's  employes  to  cease  work  unless  he  complied  with  their 
request.  The  plaintiff  still  refused,  whereupon  Munce  informed 
him  that  he  need  not  send  any  more  meat  unless  he  arranged 
with  the  union,  as  his  men  had  been  ordered  to  quit  work,  and 
thereupon  Munce  ceased  to  deal  with  him.  There  was  a  re- 
covery by  the  plaintiff,  which  was  sustained  by  all  the  appellate 
courts.  Leathem  v.  Craig  [1899]  2  Ir.  R.  667;  Quinn  v.  Lea- 
them  [1901]  App.  Cas.  495.  Five  concurring  opinions  were 
written  in  the  house  of  lords,  which  unanimously  held  that  "a 
combination  of  two  or  more,  without  justification  or  excuse, 
to  injure  a  man  in  his  trade  by  inducing  his  customers  or 


438    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

servants  to  break  their  contracts  with  hira,  or  not  to  deal  with 
him  or  continue  in  his  employment,  is,  if  it  results  in  damage 
to  him,  actionable." 

The  earlier  case  of  Allen  v.  Flood  [1898]  App.  Gas.  1,  upon 
which  the  appellate  division  relied  in  rendering  the  judgment 
now  before  us,  was  carefully  limited  and  explained,  if  not 
virtually  overruled. 

The  English  cases  were  so  thoroughly  reviewed  that  it  is 
unnecessary  to  make  further  reference  to  them.  Among  other 
things  it  was  said:  "He  [referring  to  the  plaintiff]  was  at 
liberty  to  earn  his  own  living  in  his  own  way,  provided  he  did 
not  violate  some  special  law  prohibiting  him  from  so  doing, 
and  provided  he  did  not  infringe  the  rights  of  other  people. 
This  liberty  involved  liberty  to  deal  with  other  persons  who 
were  willing  to  deal  with  him.  This  liberty  is  a  right  recog- 
nized by  law.  Its  correlative  is  the  general  duty  of  every 
one  not  to  prevent  the  free  exercise  of  this  liberty,  except  so 
far  as  his  own  liberty  of  action  may  justify  him  in  so  doing. 
But  a  person's  liberty  or  right  to  deal  with  others  is  nugatory 
unless  they  are  at  liberty  to  deal  with  him  if  they  choose  to  do 
so.  Any  interference  with  their  liberty  to  deal  with  him 
affects  him.  If  such  interference  is  justifiable  in  point  of  law, 
he  has  no  redress.  Again,  if  such  interference  is  unlawful,  the 
only  person  who  can  sue  in  respect  of  it  is,  as  a  rule,  the  per- 
son immediately  affected  by  it.  Another  who  suffers  by  it  has 
usually  no  redress.  The  damage  to  him  is  too  remote,  and  it 
would  be  obviously  practically  impossible  and  highly  incon- 
venient to  give  legal  redress  to  all  who  suffer  from  such 
Avrongs.  But  if  the  interference  is  wrongful,  and  is  intended 
to  damage  a  third  person,  and  he  is  damaged  in  fact, — in  other 
words,  if  he  is  wrongfully  and  intentionally  struck  at  through 
others  and  is  thereby  damnified, — the  whole  aspect  of  the  case 
is  changed.  The  wrong  done  to  others  reaches  him ;  his  rights 
are  infringed,  although  indirectly;  and  damage  to  him  is  not 
remote  or  unforeseen,  but  is  the  direct  consequence  of  what 
has  been  done.  Our  law,  as  I  understand  it,  is  not  so  defective 
as  to  refuse  him  a  remedy  by  an  action  under  such  circum- 
stances." This  decision  was  not  founded  upon  ancient  stat- 
utes, as  some  of  the  early  English  cases  are,  but  upon  the 
common  law. 


THE  COIVOION  LAW  439 

See,  also,  the  opinion  in  Taff  Vale  Ry.  Co.  v.  Amalgamated 
See.  [1901]  App.  Cas.  431,  which  had  not  been  published  when 
the  judgment  in  Quinn  v.  Leathern  was  pronounced. 

The  position  of  the  federal  courts  and  those  of  most  of  the 
states  ijs  to  the  same  effect.  Steamship  Co.  v.  McKenna  (C. 
C.)  30  Fed.  48;  Casey  v.  Typographical  Union  (C.  C.)  45  Fed. 
135,  12  L.  R.  A.  193 ;  Hopkins  v.  Stave  Co.,  28  C.  C.  A.  99 ;  In 
re  Debs,  158  U.  S.  564,  39  L.  Ed.  1092;  Plant  v.  Woods,  176 
Mass.  492,  51  L.  R.  A.  339,  79  Am.  St.  Rep.  330;  State  v. 
Donaldson,  32  N.  J.  Law,  151,  90  Am.  Dec.  649 ;  Barr  v.  Essex 
Trades  Council-,  53  N.  J.  Eq.  101;  Printing  Co.  v.  Howell,  26 
Or.  527,  28  L.  R.  A.  464,  46  Am.  St.  Rep.  640 ;  State  v.  Glidden, 
55  Conn.  46,  3  Am.  St.  Rep.  23;  Crump's  Case,  84  Va.  927,  10 
Am.  St.  Rep.  895;  State  v.  Stewart,  59  Vt.  273,  59  Am.  Rep. 
710;  Doremus  v.  Hennessy,  62  111.  App.  391;  State  v.  Huegin 
(Wis.)  85  N.  W.  1046 ;  Chipley  v.  Atkinson,  23  Fla.  206, 1  South 
934,  11  Am.  St.  Rep.  367;  Lucke  v.  Cutters'  and  Trimmers 
Assembly,  77  Md.  396,  19  L.  R.  A.  408,  39  Am.  St.  Rep.  421 
Murdock  v.  Walker,  152  Pa.  595,  34  Am.  St.  Rep.  678 ;  Beck  v 
Protective  Union,  118  Mich.  497,  42  L.  R.  A.  407,  74  Am.  St 
Rep.  421.  I  add  to  the  discussion  the  common  law  governing 
the  subject  a  quotation  from  the  statute  against  crimes  in  this 
state,  as  indicating  the  policy  of  the  law:  "If  two  or  more 
persons  conspire,  *  *  *  to  prevent  another  from  exercis- 
ing a  lawful  trade  or  calling,  or  doing  any  other  lawful  act,  by 
force,  threats,  intimidation,  or  by  interfering  or  threatening 
to  interfere  with  tools,  implements  or  property,  belonging  to 
or  used  by  another,  or  with  the  use  or  employment  thereof, 
*  *  *  each  of  them  is  guilty  of  a  misdemeanor."  Pen, 
Code,  §  168. 

I  think  that  the  action  of  the  defendants  was  unlawful  and 
was  properly  restrained,  but  the  injunction,  in  the  form 
granted,  is  too  broad,  and  requires  modification.  It  prevents 
the  defendants  "from  coercing  or  obtaining  by  command, 
threats,  strikes,  or  otherwise,  the  dismissal  or  discharge  by 
any  employer,  contractor,  or  owner,  of  the  members  of  the 
plaintiff  corporation,"  etc.  It  is  not  limited  to  coercion,  but 
prevents  the  defendant  from  obtaining,  not  simply  by  com- 
mand, threats,  etc.,  but  by  any  means,  the  discharge  of  the 
plaintiffs.    This  might  prevent  fair  persuasion  or  solicitation, 


440    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

which  the  defendants  may  resort  to.  While  this  might  have 
been  corrected  by  motion  at  special  term,  for  the  decision  of 
the  trial  justice  does  not  warrant  it,  it  may  be  corrected  upon 
appeal. 

The  order  of  the  appellate  division,  so  far  as  appealed  from, 
should  be  reversed,  and  the  judgment  of  the  special  term  modi- 
fied by  striking  out  the  words  "or  otherwise"  therefrom,  and, 
as  modified,  affirmed,  with  costs  to  the  appellants  in  all  courts, 

O'Brien  and  Haight,  JJ.  (Gray,  J.,  in  memorandum),  con- 
cur with  Parker,  C.  J.  Bartlett  and  MxVRTln,  JJ.,  concur  with 
Vann,  J. 

Ordered  accordingly J^ 


VEGELAHN  v.  GUNTNER 

(Supreme  Judicial  Court  of  Mass.,  1896.     167  Mass.  92.) 

Bill  by  Frederick  0.  Vegelahn  against  George  M.  Guntner 
and  others  for  an  injunction.  An  injunction  issued  pendente 
lite  restraining  the  respondents  from  interfering  with  the 
plaintiff's  business  by  patrolling  the  sidewalk  in  front  of  or  in 
the  vicinity  of  the  premises  occupied  by  him,  for  the  purpose 
of  preventing  any  person  in  his  employment,  or  desirous  of 
entering  the  same,  from  entering  it  or  continuing  in  it ;  or  by 
obstructing  or  interfering  with  any  persons  in  entering  or 
leaving  the  plaintiff's  said  premises;  or  by  intimidating  any 
person  in  the  employment  of  the  plaintiff,  or  desirous  of  en- 
tering the  same ;  or  by  any  scheme  or  conspiracy  for  the  pur- 
pose of  annoying,  hindering,  interfering  with,  or  preventing 
any  person  in  the  employment  of  the  plaintiff,  or  desirous  of 
entering  the  same,  from  entering  it,  or  from  continuing  therein. 
This  injunction  was  approved. 

ALLEN,  J,  The  principal  question  in  this  case  is  whether 
the  defendants  should  be  enjoined  against  maintaining  the 
patrol.  The  report  shows  that,  following  upon  a  strike  of 
the  plaintiff's  workmen,  the  defendants  conspired  to  prevent 

73 — See,  however,  The  People  v. 
Fisher,  14  W©nd.  10. 


THE  COMMON  LAW  441 

him  from  getting  workmen,  and  thereby  to  prevent  him  from 
carrying  on  his  business,  unless  and  until  he  should  adopt  a 
certain  schedule  of  prices.  The  means  adopted  were  persuasion 
and  social  pressure,  threats  of  personal  injury  or  unlawful 
harm  conveyed  to  persons  employed  or  seeking  employment, 
and  a  patrol  of  two  men  in  front  of  the  plaintiff's  factory, 
maintained  from  half  past  6  in  the  morning  till  half  past  5 
in  the  afternoon,  on  one  of  the  busiest  streets  of  Boston.  The 
number  of  men  was  greater  at  times,  and  at  times  showed 
some  little  disposition  to  stop  the  plaintiff's  door.  The  patrol 
proper  at  times  went  further  than  simple  advice,  not  obtruded 
beyond  the  point  where  the  other  person  was  willing  to  listen ; 
and  it  was  found  that  the  patrol  would  probably  be  continued 
if  not  enjoined.  There  was  also  some  evidence  of  persuasion 
to  break  existing  contracts. 

The  patrol  was  maintained  as  one  of  the  means  of  carrying 
out  the  defendants'  plan,  and  it  was  used  in  combination  with 
social  pressure,  threats  of  personal  injury  or  unlawful  harm, 
and  persuasion  to  break  existing  contracts.  It  was  thus  one 
means  of  intimidation,  indirectly  to  the  plaintiff,  and  directly 
to  persons  actually  employed,  or  seeking  to  be  employed,  by 
the  plaintiff,  and  of  rendering  such  employment  unpleasant 
or  intolerable  to  such  persons.  Such  an  act  is  an  unlawful 
interference  with  the  rights  both  of  employer  and  of  employed. 
An  employer  has  a  right  to  engage  all  persons  who  are  willing 
to  work  for  him,  at  such  prices  as  may  be  mutually  agreed 
upon,  and  persons  employed  or  seeking  employment  have  a 
corresponding  right  to  enter  into  or  remaiu  in  the  employment 
of  any  person  or  corporation  willing  to  employ  them.  These 
rights  are  secured  by  the  constitution  itself.  Com.  v.  Perry, 
155  Mass.  117;  People  v.  Gillson,  109  N.  Y.  389;  BraceviUe 
Coal  Co.  V.  People,  147  111.  71 ;  Ritchie  v.  People,  155  111.  98 ; 
Low  V.  Printing  Co.  (Neb.)  59  N.  W.  362.  No  one  can  law- 
fully interfere  by  force  or  intimidation  to  prevent  employers 
or  persons  employed  or  wishing  to  be  employed  from  the 
exercise  of  these  rights.  It  is  in  Massachusetts,  as  in  some 
other  states,  even  made  a  criminal  offense  for  one,  by  intimida- 
tion or  force,  to  prevent,  or  seek  to  prevent,  a  person  from 
entering  into  or  continuing  in  the  employment  of  a  person  or 
corporation.     Pub.  St.  c.  74,  §  2.    Intimidation  is  not  limited 


442    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

to  threats  of  violence  or  of  physical  injury  to  person  or  prop- 
erty. It  has  a  broader  signification,  and  there  also  may  be  a 
moral  intimidation  which  is  illegal.  Patrolling  or  picketing, 
under  the  circumstances  stated  in  the  report,  has  elements  of 
intimidation  like  those  which  were  found  to  exist  in  Sherry  v. 
Perkins,  147  Mass.  212.  It  was  declared  to  be  unlawful  in 
Reg.  V.  Druitt,  10  Cox,  Cr.  Cas.  592 ;  Reg.  v.  Hibbert,  13  Cox, 
Cr.  Cas.  82;  Reg.  v.  Bauld,  Id.  282.  It  was  assumed  to  be 
unlawful  in  Trollope  v.  Trader's  Fed.  (1875)  11  L.  T.  228, 
though  in  that  case  the  pickets  were  withdrawn  before  the 
bringing  of  the  bill.  The  patrol  was  an  unlawful  interference 
both  with  the  plaintiff  and  with  the  workmen,  within  the 
principle  of  many  cases ;  and,  when  instituted  for  the  purpose 
of  interfering  with  his  business,  it  became  a  private  nuisance. 
See  Carew  v.  Rutherford,  106  Mass.  1 ;  Walker  v.  Cronin,  107 
Mass.  555;  Barr  v.  Trades  Council  (N.  J.  Ch.)  30  Atl.  881; 
Murdock  v.  Walker,  152  Pa.  St.  595 ;  China  Co.  v.  BrowTi,  164 
Pa.  St.  449;  Coeur  D'Alene  Consol.  &  Min.  Co.  v.  Miners' 
Union  of  Wardner,  51  Fed.  260;  Temperton  v.  Russell  [1893] 
1  Q.  B.  715;  Floyd  v.  Jackson  [1895]  11  L.  T.  276;  Wright  v. 
Hennessey,  52  Alb.  Law  J.  104  (a  case  before  Baron  Pollock)  ; 
Judge  V.  Bennett,  36  Wkly.  Rep.  103;  Lyons  v.  Wilkins  [1896] 
1  Ch.  811. 

The  defendants  contend  that  these  acts  were  justifiable, 
because  they  were  only  seeking  to  secure  better  wages  for 
themselves,  by  compelling  the  plaintiff  to  accept  their  schedule 
of  wages.  This  motive  or  purpose  does  not  justify  maintain- 
ing a  patrol  in  front  of  the  plaintiff's  premises,  as  a  means  of 
carrying  out  their  conspiracy.  A  combination  among  persons 
merely  to  regulate  their  own  conduct  is  Avithin  allowable  com- 
petition, and  is  lawful,  although  others  may  be  indirectly 
affected  thereby.  But  a  combination  to  do  injurious  acts  ex- 
pressly directed  to  another,  by  way  of  intimidation  or  con- 
straint, either  of  himself  or  of  persons  employed  or  seeking 
to  be  employed  by  him,  is  outside  of  allowable  competition,  and 
is  unlawful.  Various  decided  cases  fall  within  the  former 
class;  for  example:  Worthington  v.  Waring,  157  Mass.  421; 
Snow  V.  Wheeler,  113  Mass.  179;  Bowen  v.  Matheson,  14 
Allen,  499;  Com.  v.  Hunt,  4  Mete.  (Mass.)  Ill;  Heywood  v. 
Tillson,  75  Me.  225 ;  Cote  v.  Murphy,  159  Pa.  St.  420,  28  Atl. 


THE  COMMON  LAW  443 

190;  Bohn  Manuf'g  Co.  v.  Ilollis,  54  Minn.  223;  Steamship  Co. 
V.  McGregor  [1892]  App.  Cas.  25;  Curran  v.  Treleaven  [1891] 
2  Q.  B.  545,  561.    The  present  case  falls  within  the  latter  class. 

Nor  does  the  fact  that  the  defendants'  acts  might  subject 
them  to  an  indictment  prevent  a  court  of  equity  from  issuing 
an  injunction.  It  is  true  that,  ordinarily,  a  court  of  equity 
will  decline  to  issue  an  injunction  to  restrain  the  commission 
of  a  crime ;  but  a  continuing  injury  to  property  or  business 
may  be  enjoined,  although  it  may  also  be  punishable  as  a 
nuisance  or  other  crime.  Sherry  v.  Perkins,  147  Mass,  212 ; 
In  re  Debs,  158  U.  S.  564,  593,  599 ;  Baltimore  &  P.  R.  Co.  v. 
Fifth  Baptist  Church,  108  U.  S.  317,  329 ;  Cranf ord  v.  Tyrrell, 
128  N.  Y.  341,  344;  Gilbert  v.  Mickle,  4  Sandf.  Ch.  357;  Port 
of  Mobile  v.  Louisville  &  N.  R.  Co.,  84  Ala.  115,  126,  4  South. 
106 ;  Arthur  v.  Oakes,  11  C.  C.  A.  209 ;  Toledo,  A.,  A.  &  N.  M. 
Ry.  Co.  V.  Pennsylvania  Co.,  54  Fed.  730,  744;  Emperor  of 
Austria  v.  Day,  3  De  Gex,  F.  &  J.  217,  239,  240,  253 ;  Hermann 
Loog  v.  Bean,  26  Ch.  Div.  306,  314,  316,  317 ;  Monson  v.  Tus- 
saud  [1894]  1  Q.  B.  671,  689,  690,  698. 

A  question  is  also  presented  whether  the  court  should  enjoin 
such  interference  with  persons  in  the  employment  of  the  plain- 
tiff who  are  not  bound  by  contract  to  remain  with  him,  or  with 
persons  who  are  not  under  any  existing  contract,  but  who  are 
seeking  or  intending  to  enter  into  his  employment.  A  con- 
spiracy to  interfere  with  the  plaintiff's  business  by  means  of 
threats  and  intimidation,  and  by  maintaining  a  patrol  in  front 
of  his  premises,  in  order  to  prevent  persons  from  entering  his 
employment,  or  in  order  to  prevent  persons  who  are  in  his 
employment  from  continuing  therein,  is  unlawful,  even  though 
such  persons  are  not  bound  by  contract  to  enter  into  or  to 
continue  in  his  employment;  and  the  injunction  should  not  be 
so  limited  as  to  relate  only  to  persons  who  are  bound  by  ex- 
isting contracts.  Walker  v.  Cronin,  107  Mass.  555,  565 ;  Carew 
V.  Rutherford,  106  Mass.  1 ;  Sherry  v.  Perkins,  147  Mass.  212 ; 
Temperton  v.  Russell  [1893]  1  Q.  B.  715,  728,  731;  Flood  v. 
Jackson  [1895]  11  L.  T.  276.  We  therefore  think  that  the 
injunction  should  be  in  the  form  as  originally  issued.  Sa 
ordered?* 

74 — Accord:  Barnes  v.  Typo-  and  Farmer,  JJ.,  dissenting);  Jen- 
graphical  Union,  232  111.  424  (Scott       sen    v.    Cooks'    &    Waiters'    Union^ 


444    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ITCELD,  C  J.  (dissenting).  The  practice  of  issuing  injunc- 
tions in  cases  of  this  kind  is  of  very  recent  origin.  One  of  the 
earliest  authorities  in  the  United  States  for  enjoining,  in  equity, 
acts  somewhat  like  those  alleged  against  the  defendants  in 
the  present  case,  is  Sherry  v.  Perkins  (decided  in  1888)  147 
Mass.  212.  It  was  found  as  a  fact  in  that  case  that  the  de- 
fendants entered  into  a  scheme,  by  threats  and  intimidation, 
to  prevent  persons  in  the  employment  of  the  plaintiffs  as  lasters 
from  continuing  in  such  employment,  and,  in  like  manner,  to 
prevent  other  persons  from  entering  into  such  employment  as 
lasters;  that  the  use  of  the  banners  was  a  part  of  the  scheme; 
that  the  first  banner  was  carried  from  January  8,  1887,  to 
March  22,  1887,  and  the  second  banner  from  March  22,  1887, 
to  the  time  of  the  hearing;  and  that  "the  plaintiffs  have  been 
and  are  injured  in  their  business  and  property  thereby. ' '  The 
full  court  says :  ' '  The  act  of  displaying  banners  with  devices, 
as  a  means  of  threats  and  intimidation  to  prevent  persons  from 
entering  into  or  continuing  in  the  employment  of  the  plaintiffs, 
was  injurious  to  the  plaintiffs,  and  illegal  at  common  law  and 
by  statute.  Pub.  St.  c.  74,  §  2 ;  Walker  v.  Cronin,  107  Mass. 
555,"  "The  banner  was  a  standing  menace  to  all  who  were 
or  wished  to  be  in  the  employment  of  the  plaintiffs,  to  deter 
them  from  entering  the  plaintiffs'  premises.  Maintaining  it 
was  a  continuous  unlawful  act,  injurious  to  the  plaintiffs' 
business  and  property,  and  was  a  nuisance  such  as  a  court  of 
equity  will  grant  relief  against.  Gilbert  v.  Mickle,  4  Sandf. 
Ch.  357;  Spinning  Co.  v.  Riley,  L.  R.  6  Eq.  551."  Gilbert  v. 
Mickle,  one  of  the  authorities  cited  in  Sherry  v.  Perkins,  was 
a  suit  in  equity  by  an  auctioneer  against  the  mayor  of  the  city 
of  New  York  to  restrain  him  and  those  acting  under  him  from 
parading,  placing,  or  keeping  before  the  plaintiff's  auction 
rooms  a  placard  as  follows:  "Strangers,  beware  of  mock 
auctions."  A  temporary  injunction  was  issued,  but,  on  hear- 
ing, it  was  dissolved.  Notwithstanding  what  is  said  in  the 
opinion  of  the  vice  chancellor,  his  conclusion  is  as  follows: 

81  Pac.  1069  (Wash.  1905);  Martin  139    Fed.    71;    Casey    v.    Cincinnati 

V.  McFall,  65  N.  J.  Eq.  91.  Typographical  Union,  45  Fed.  135; 

On  the  illegality  of   the  boycott,  Thomas  v.  Cincinnati  N.  O.  &  T.  P. 

see  Martin  v.  McFall,  supra;  Loewe  Ry.,  62  Fed.  803. 
V.  California  State  Fed.  of  Labor, 


THE  COMMON  LAW  445 

"I  am  satisfied  that  it  is  my  duty  to  leave  the  party  to  his 
remedy  by  an  action  at  law. ' '  Spinning  Co.  v.  Riley  is  a  well- 
known  decision  of  Vice  Chancellor  Malins.  The  bill  prayed 
that  the  defendants  might  be  "restrained  from  printing  or 
publishing  any  placards  or  advertisements  similar  to  those 
already  set  forth."  The  defendants  had  caused  to  be  posted 
on  the  walls  and  other  public  places  in  the  neighborhood  of 
the  plaintiff's  works,  and  caused  to  be  printed  in  certain  news- 
papers, a  notice  as  follows:  "Wanted  all  well-wishers  to  the 
Operative  Cotton  Spinning,  &c..  Association  not  to  trouble  or 
cause  any  annoyance  to  the  Springhead  Spinning  Company 
lees,  by  knocking  at  the  door  of  their  office,  until  the  dispute 
between  them  and  the  self-actor  minders  is  finally  terminated. 
By  special  order,  Carrodus,  32  Greaves  Street,  Oldham."  The 
case  was  heard  upon  demurrers.  The  vice  chancellor  says: 
"For  the  reasons  I  have  stated,  I  overruled  these  demurrers, 
because  the  bill  states,  and  the  demurrers  admit,  acts  amount- 
ing to  the  destruction  of  property."  Of  this  case,  the  court,  in 
Sherry  v.  Perkins,  say:  "Some  of  the  language  in  Spinning 
Co.  V.  Riley  has  been  criticised,  but  the  decision  has  not  been 
overruled."  The  cases  are  there  cited  in  which  that  decision 
has  been  doubted  or  criticised.  Of  that  decision,  this  court, 
in  Boston  Diatite  Co.  v.  Florence  Manuf 'g  Co.,  114  Mass.  69, 
say:  "The  opinions  of  Vice  Chancellor  Malins  in  Spinning 
Co.  V.  Riley,  L.  R.  6  Eq.  551,  in  Dixon  v.  Holden,  L.  R.  7  Eq. 
488,  and  in  Rollins  v.  Hinks,  L.  R.  13  Eq.  355,  appear  to  us  to 
be  so  inconsistent  with  these  authorities  [authorities  which 
the  court  had  cited],  and  with  well-settled  principles,  that  it 
would  be  superfluous  to  consider  whether,  upon  the  facts  be- 
fore him,  his  decisions  can  be  supported."  Much  the  same 
language  was  used  by  the  justices  in  Assurance  Co.  v.  Knott, 
10  Ch.  App.  142,  a  part  of  the  headnote  of  which  is:  "Dixon 
V.  Holden  and  Spinning  Co.  v.  Riley  overruled."  In  Temper- 
ton  V.  Russell  [1893]  1  Q.  B.  435,  438,  Lindley,  L.  J.,  says  of 
the  case  of  Spinning  Co.  v.  Riley  that  it  was  overruled  by  the 
court  of  appeal  in  Assurance  Co.  v.  Knott. 

Since  the  judicature  act,  however,  the  courts  of  England 
have  interfered  to  restrain,  by  injunction,  the  publication  or 
continued  publication  of  libelous  statements,  particularly  those 
injuriously  affecting  the  business  or  property  of  another,  as 


446    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

well  as  injunctions  similar  to  that  in  the  present  case.  St.  36 
&  37  Vict.  c.  66,  §25,  subds.  5,  8;  Monson  v.  Tussaud  [1894] 
1  Q.  B.  671,  672;  Lyons  v.  Wilkins  [1896]  1  Ch.  811,  827.  But, 
in  the  absence  of  any  power  given  by  statute,  the  jurisdiction 
of  a  court  of  equity,  having  only  the  powers  of  the  English 
high  court  of  chancery,  does  not,  I  think,  extend  to  enjoining 
acts  like  those  complained  of  in  the  case  at  bar,  unless  they 
amount  to  a  destruction  or  threatened  destruction  of  property, 
or  an  irreparable  injury  to  it. 

In  England  the  rights  of  employers  and  employed  with  refer- 
ence to  strikes,  boycotts,  and  other  similar  movements  have 
not,  in  general,  been  left  to  be  worked  out  by  the  courts  from 
common-law  principles,  but  statutes,  from  time  to  time,  have 
been  passed  defining  what  may  and  what  may  not  be  permitted. 
The  administration  of  these  statutes  largely  has  been  through 
the  criminal  courts. 

As  a  means  of  prevention,  the  remedy  given  by  Pub.  St.  c. 
74,  §  2,  would  seem  to  be  adequate  where  the  section  is  appli- 
cable, unless  the  destruction  of,  or  an  irreparable  injury  to, 
property  is  threatened ;  and  there  is  the  additional  remedy  of 
an  indictment  for  a  criminal  conspiracy  at  common  law,  if  the 
acts  of  the  defendant  amount  to  that.  If  the  acts  complained 
of  do  not  amount  to  intimidation  or  force,  it  is  not  in  all  re- 
spects clear  what  are  lawful  and  what  are  not  lawful  at  com- 
mon law.  It  seems  to  be  established  in  this  commonwealth 
that,  intentionally  and  without  justLfiable  cause,  to  entice,  by 
persuasion,  a  workman  to  break  an  existing  contract  with  his 
employer,  and  to  leave  his  employment,  is  actionable,  whether 
done  with  actual  malice  or  not.  Walker  v.  Cronin,  107  Mass. 
555.  What  constitutes  justifiable  cause  remains  in  some  re- 
spects undetermined.  Whether  to  persuade  a  person  who  is 
free  to  choose  his  employment  not  to  enter  into  the  employ- 
ment of  another  person  gives  a  cause  of  action  to  such  other 
person,  by  some  courts  has  been  said  to  depend  upon  the 
question  of  actual  malice;  and,  in  considering  this  question  of 
malice,  it  is  said  that  it  is  important  to  determine  whether  the 
defendant  has  any  lawful  interest  of  his  own  in  preventing 
the  employment,  such  as  that  of  competition  in  busmess.  For 
myself,  I  have  been  unable  to  see  how  malice  is  necessarily 


THE  COiMJION  LAW  447 

decisive.  To  persnade  one  man  not  to  enter  into  the  employ- 
ment of  another,  by  telling  the  truth  to  him  about  such  other 
person  and  his  business,  I  am  not  convinced  is  actionable  at 
common  law,  whatever  the  motive  may  be. 

Such  persuasion,  when  accompanied  by  falsehood  about  such 
other  person  or  his  business,  may  be  actionable,  unless  the 
occasion  of  making  the  statements  is  privileged ;  and  then  the 
question  of  actual  malice  may  be  important.  This,  I  think,  is 
the  effect  of  the  decision  in  Rice  v.  Albee,  164  Mass.  88.  When 
one  man  orally  advises  another  not  to  enter  into  a  third  per- 
son's employment,  it  would,  I  think,  be  a  dangerous  principle 
to  leave  his  liability  to  be  determined  by  a  jury  upon  the 
question  of  his  malice  or  want  of  malice,  except  in  those  cases 
where  the  words  spoken  were  false.  In  the  present  case,  if 
the  establishment  of  a  patrol  is  using  intimidation  or  force, 
within  the  meaning  of  our  statute,  it  is  illegal  and  criminal. 
If  it  does  not  amount  to  intimidation  or  force,  but  is  carried 
to  such  a  degree  as  to  interfere  with  the  use  by  the  plaintiff 
of  his  property,  it  may  be  illegal  and  actionable.  But  some- 
thing more  is  necessary  to  justify  issuing  an  injunction.  If 
it  is  in  violation  of  any  ordinance  of  the  city  regulating  the 
use  of  streets,  there  may  be  a  prosecution  for  that,  and  the 
police  can  enforce  the  ordinance ;  but  if  it  is  merely  a  peaceful 
mode  of  finding  out  the  persons  who  intend  to  enter  the 
plaintift"s  premises  to  apply  for  Avork,  and  of  informing  them 
of  the  actual  facts  of  the  case,  in  order  to  induce  them  not  to 
enter  the  plaintiff's  employment,  in  tlie  absence  of  any  statute 
relating  to  the  subject,  I  doubt  if  it  is  illegal,  and  I  see  no 
ground  for  issuing  an  injunction  against  it. 

As  no  objection  is  now  made  by  the  defendants  to  the 
equitable  jurisdiction,  I  am  of  opinion  on  the  facts  reported, 
as  I  understand  them,  that  the  decree  entered  by  Mr.  Justice 
Holmes  should  be  affirmed,  without  modification. 

HOLMES,  J.  In  a  case  like  the  present,  it  seems  to  me 
that,  whatever  the  true  result  may  be,  it  will  be  of  advantage 
to  sound  thinking  to  have  the  less  popular  view  of  the  law 
stated,  and  therefore,  although,  when  I  have  been  unable  to 
bring  my  brethren  to  share  my  convictions,  my  almost  invari- 
able practice  is  to  defer  to  them  in  sUenee,  I  depart  from  that 


448    COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

practice  in  this  case,  notwithstanding  my  unwillingness  to  do 
so,  in  support  of  an  already  rendered  judgment  of  my  own. 

In  the  first  place,  a  word  or  two  should  be  said  as  to  the 
meaning  of  the  report,  I  assume  that  my  brethren  construe  it 
as  I  meant  it  to  be  constinied,  and  that,  if  they  were  not  pre- 
pared to  do  so,  they  would  give  an  opportunity  to  the  defend- 
ants to  have  it  amended  in  accordance  with  what  I  state  my 
meaning  to  have  been.  There  was  no  proof  of  any  threat  or 
danger  of  a  patrol  exceeding  two  men,  and  as,  of  course,  an 
injunction  is  not  granted  except  with  reference  to  what  there 
is  reason  to  expect  in  its  absence,  the  question  on  that  point 
is  whether  a  patrol  of  two  men  should  be  enjoined.  Again, 
the  defendants  are  enjoined  by  the  final  decree  from  intimi- 
dating by  threats,  express  or  implied,  of  physical  harm  to 
body  or  property,  any  person  who  may  be  desirous  of  enter- 
ing into  the  employment  of  the  plaintiff,  so  far  as  to  prevent 
him  from  entering  the  same.  In  order  to  test  the  correctness 
of  the  refusal  to  go  further,  it  must  be  assumed  that  the  de- 
fendants obey  the  express  prohibition  of  the  decree.  If  they 
do  not,  they  fall  within  the  injunction  as  it  now  stands,  and 
are  liable  to  summary  punishment.  The  important  difference 
between  the  preliminary  and  the  final  injunction  is  that  the 
former  goes  further,  and  forbids  the  defendants  to  interfere 
with  the  plaintiff's  business  "by  any  scheme  *  *  *  or- 
ganized for  the  purpose  of  *  *  *  preventing  any  person 
or  persons  who  now  are  or  may  hereafter  be  *  *  *  de- 
sirous of  entering  the  [plaintiff's  employment]  from  entering 
it. "  I  quote  only  a  part,  and  the  part  which  seems  to  me  most 
objectionable.  This  includes  refusal  of  social  intercourse,  and 
even  organized  persuasion  or  argument,  although  free  from 
any  threat  of  violence,  either  express  or  implied.  And  this  is 
with  reference  to  persons  who  have  a  legal  right  to  contract 
or  not  to  contract  with  the  plaintiff,  as  they  may  see  fit. 
Interference  with  existing  contracts  is  forbidden  by  the  final 
decree.  I  wish  to  insist  a  little  that  the  only  point  of  differ- 
ence which  involves  a  difference  of  principle  between  the  final 
decree  and  the  preliminary  injunction,  which  it  is  proposed  to 
restore,  is  what  I  have  mentioned,  in  order  that  it  may  be  seen 
exactly  what  we  are  to  discuss.  It  appears  to  me  that  the 
opinion  of  the  majority  turns  in  part  on  the  assumption  that 


THE  COmiON  LAW  449 

the  patrol  necessarily  carries  with  it  a  threat  of  bodily  harm. 
That  assumption  I  thini:  unwarranted,  for  the  reasons  which 
I  have  given.  Furthermore,  it  cannot  be  said,  I  think,  that 
two  men,  walking  together  up  and  down  a  sidewalk,  and 
speaking  to  those  who  enter  a  certain  shop,  do  necessarily 
and  always  thereby  convey  a  threat  of  force.  I  do  not  think 
it  possible  to  discriminate,  and  to  say  that  two  workmen,  or 
even  two  representatives  of  an  organization  of  workmen,  do ; 
especially  when  they  are,  and  are  known  to  be,  under  the  in- 
junction of  this  court  not  to  do  so.  See  Stimson,  Labor  Law, 
§  60,  especially  pages  290,  298-300 ;  Reg.  v.  Shepherd,  11  Cox, 
Cr.  Cas.  325.  I  may  add  that  I  think  the  more  intelligent 
workingmen  believe  as  fully  as  I  do  that  they  no  more  can  be 
permitted  to  usurp  the  state's  prerogative  of  force  than  can 
their  opponents  in  their  controversies.  But,  if  I  am  wrong, 
then  the  decree  as  it  stands  reaches  the  patrol,  since  it  applies 
to  all  threats  of  force.  With  this  I  pass  to  the  real  difference 
between  the  interlocutory  and  the  final  decree. 

I  agree,  whatever  may  be  the  law  in  the  case  of  a  single 
defendant  (Rice  v.  Albee,  164  Mass.  88,  41  N.  E.  122),  that 
when  a  plaintiff  proves  that  several  persons  have  combined 
and  conspired  to  injure  his  business,  and  have  done  acts  pro- 
ducing that  effect,  he  shows  temporal  damage  and  a  cause  of 
action,  unless  the  facts  disclose  or  the  defendants  prove  some 
ground  of  excuse  or  justification;  and  I  take  it  to  be  settled, 
and  rightly  settled,  that  doing  that  damage  by  combined  per- 
suasion is  actionable,  as  well  as  doing  it  by  falsehood  or  by 
force.  Walker  v.  Cronia,  107  Mass.  555;  Morasse  v.  Brochu, 
151  Mass.  567 ;  Tasker  v.  Stanley,  153  Mass.  148. 

Nevertheless,  in  numberless  instances  the  law  warrants  the 
intentional  infliction  of  temporal  damage,  because  it  regards 
it  as  justified.  It  is  on  the  question  of  what  shall  amount  to 
a  justification,  and  more  especially  on  the  nature  of  the  con- 
siderations which  really  determine  or  ought  to  determine  the 
answer  to  that  question,  that  judicial  reasoning  seems  to  me 
often  to  be  inadequate.  The  true  grounds  of  decision  are 
considerations  of  policy  and  of  social  advantage,  and  it  is  vain 
to  suppose  that  solutions  can  be  attained  merely  by  logic  and 
general  propositions  of  law  which  nobody  disputes.  Proposi- 
tions as  to  public  policy  rarely  are  unanimously  accepted,  and 

Kales  R.  of  T.  Vol.  1—29 


450    COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

stiU  more  rarely,  if  ever,  are  capable  of  unanswerable  proof. 
They  require  a  special  training  to  enable  any  one  even  to  form 
an  intelligent  opinion  about  them. 

In  the  early  stages  of  law,  at  least,  they  generally  are  acted 
on  rather  as  inarticulate  instincts  than  as  definite  ideas,  for 
which  a  rational  defense  is  ready. 

To  illustrate  what  I  have  said  in  the  last  paragraph:  It 
has  been  the  law  for  centuries  that  a  man  may  set  up  a  busi- 
ness in  a  small  country  town,  too  small  to  support  more  than 
one,  although  thereby  he  expects  and  intends  to  ruin  some 
one  already  there,  and  succeeds  in  his  intent.  In  such  a  case 
he  is  not  held  to  act  "unlawfully  and  without  justifiable 
cause,"  as  was  alleged  in  Walker  v.  Cronin  and  Rice  v.  Albee. 
The  reason,  of  course,  is  that  the  doctrine  generally  has  been 
accepted  that  free  competition  is  worth  more  to  society  than 
it  costs,  and  that  on  this  ground  the  infliction  of  the  damage  is 
privileged-  Com.  v.  Hunt,  4  Mete.  (]VIass.)  Ill,  134.  Yet  even 
this  proposition  nowadays  is  disputed  by  a  considerable  body 
of  persons,  including  many  whose  intelligence  is  not  to  be 
denied,  little  as  we  may  agree  with  them. 

I  have  chosen  this  illustration  partly  with  reference  to  what 
I  have  to  say  next.  It  shows  without  the  need  of  further 
authority  that  the  policy  of  allowing  free  competition  justifies 
the  intentional  inflicting  of  temporal  damage,  including  the 
damage  of  interference  with  a  man's  business  by  some  means, 
when  the  damage  is  done,  not  for  its  own  sake,  but  as  an  in- 
strumentality in  reaching  the  end  of  victory  in  the  battle  of 
trade.  In  such  a  case  it  cannot  matter  whether  the  plaintiff  is 
the  only  rival  of  the  defendant,  and  so  is  aimed  at  specially, 
or  is  one  of  a  class  aU  of  whom  are  hit.  The  only  debatable 
ground  is  the  nature  of  the  means  by  which  such  damage  may 
be  inflicted.  We  all  agree  that  it  cannot  be  done  by  force  or 
threats  of  force.  We  all  agree,  I  presume,  that  it  may  be  done 
by  persuasion  to  leave  a  rival's  shop,  and  come  to  the  de- 
fendant's. It  may  be  done  by  the  refusal  or  withdrawal  of 
various  pecuniary  advantages,  which,  apart  from  this  conse- 
quence, are  within  the  defendant's  lawful  control.  It  may  be 
done  by  the  withdrawal  of,  or  threat  to  withdraw,  such  ad- 
vantages from  third  persons  who  have  a  right  to  deal  or  not 
to  deal  with  the  plaintiff,  as  a  means  of  inducing  them  not  to 


THE  COMMON  LAW  451 

deal  wnth  him  either  as  customers  or  servants.  Com.  v.  Hunt, 
4  Mete.  (Mass.)  Ill,  112,  133;  Bowen  v.  Matheson,  14  Allen, 
499;  Heywood  v.  Tillson,  75  Me.  225;  Steamship  Co.  v.  Mc- 
Gregor [1892]  App.  Cas.  25.  I  have  seen  the  suggestion  made 
that  the  conflict  between  employers  and  employed  was  not 
competition.  But  I  venture  to  assume  that  none  of  my  brethren 
would  rely  on  that  suggestion.  If  the  policy  on  which  our  law 
is  founded  is  too  narrowly  expressed  in  the  term  "free  com- 
petition," we  may  substitute  "free  struggle  for  life."  Cer- 
tainly, the  policy  is  not  limited  to  struggles  between  persons 
of  the  same  class,  competing  for  the  same  end.  It  applies  to 
all  conflicts  of  temporal  interests. 

I  pause  here  to  remark  that  the  word  "threats"  often  is 
used  as  if,  when  it  appeared  that  threats  had  been  made,  it 
appeared  that  unlawful  conduct  had  begun.  But  it  depends 
on  what  you  threaten.  As  a  general  rule,  even  if  subject  to 
some  exceptions,  what  you  may  do  in  a  certain  event  you  may 
threaten  to  do — that  is,  give  warning  of  your  intention  to  do — 
in  that  event,  and  thus  allow  the  other  person  the  chance  of 
avoiding  the  consequence.  So,  as  to  "compulsion,"  it  de- 
pends on  how  you  "compel."  Com.  v.  Hunt,  4  Mete.  (Mass.) 
Ill,  133.  So  as  to  "annoyance"  or  "intimidation."  Connor 
V.  Kent,  Curran  v.  Treleaven,  17  Cox,  Cr.  Cas.  354,  367,  368, 
370.  In  Sherry  v.  Perkins,  147  Mass.  212,  it  was  found  as  a 
fact  that  the  display  of  banners  which  was  enjoined  was  part 
of  a  scheme  to  prevent  workmen  from  entering  or  remaining 
in  the  plaintiff's  employment,  "by  threats  and  intimidation." 
The  context  showed  that  the  words  as  there  used  meant  threats 
of  personal  violence  and  intimidation  by  causing  fear  of  it. 

I  have  seen  the  suggestion  made  that  the  conflict  between 
employers  and  employed  is  not  competition.  But  I  venture  to 
assume  that  none  of  my  brethren  would  rely  on  that  sugges- 
tion. If  the  policy  on  which  our  law  is  founded  is  too  narrowly 
expressed  in  the  term  free  competition,  we  may  substitute  free 
struggle  for  life.  Certainly  the  policy  is  not  limited  to  strug- 
gles between  persons  of  the  same  class  competing  for  the  same 
end.    It  applies  to  all  conflicts  of  temporal  interests. 

So  far,  I  suppose,  we  are  agreed.  But  there  is  a  notion, 
which  latterly  has  been  insisted  on  a  good  deal,  that  a  com- 
bination of  persons  to  do  what  any  one  of  them  lawfully  might 


452    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

do  by  himself  will  make  the  otherwise  lawful  conduct  unlaw- 
ful. It  would  be  rash  to  say  that  some  as  yet  unformulated 
truth  may  not  be  hidden  under  this  proposition.  But,  in  the 
general  form  in  which  it  has  been  presented  and  accepted  by 
many  courts,  I  think  it  plainly  untrue,  both  on  authority  and 
principle.  Com.  v.  Hunt,  4  Mete.  (Mass.)  Ill;  Randall  v. 
Hazelton,  12  Allen,  412,  414.  There  was  combination  of  the 
most  flagrant  and  dominant  kind  in  Bowen  v.  Matheson,  and 
in  the  Steamship  Co.  Case,  and  combination  was  essential  to 
the  success  achieved.  But  it  is  not  necessary  to  cite  cases.  It 
is  plain  from  the  slightest  consideration  of  practical  affairs, 
or  the  most  superficial  reading  of  industrial  history,  that  free 
competition  means  combination,  and  that  the  organization  of 
the  world,  now  going  on  so  fast,  means  an  ever-increasing 
might  and  scope  of  combination.  It  seems  to  me  futile  to  set 
our  faces  against  this  tendency.  Whether  beneficial  on  the 
whole,  as  I  think  it,  or  detrimental,  it  is  inevitable,  unless  the 
fundamental  axioms  of  society,  and  even  the  fundamental  con- 
ditions of  life,  are  to  be  changed. 

One  of  the  eternal  conflicts  out  of  which  life  is  made  up  is 
that  between  the  effort  of  every  man  to  get  the  most  he  can 
for  his  services,  and  that  of  society,  disguised  under  the  name 
of  capital,  to  get  his  services  for  the  least  possible  return.  Com- 
bination on  the  one  side  is  patent  and  powerful.  Combination 
on  the  other  is  the  necessary  and  desirable  countei-part,  if  the 
battle  is  to  be  carried  on  in  a  fair  and  equal  way.  I  am  unable 
to  reconcile  Temperton  v.  Russell  [1893]  1  Q.  B.  715,  and  the 
cases  which  follow  it,  with  the  Steamship  Co.  Case.  But 
Temperton  v.  Russell  is  not  a  binding  authority  here,  and 
therefore  I  do  not  think  it  necessary  to  discuss  it. 

If  it  be  true  that  workingmen  may  combine  with  a  view, 
among  other  things,  to  getting  as  much  as  they  can  for  their 
labor,  just  as  capital  may  combine  with  a  view  to  getting  the 
greatest  possible  return,  it  must  be  true  that,  when  combined, 
they  have  the  same  liberty  that  combined  capital  has,  to  sup- 
port their  interests  by  argument,  persuasion,  and  the  bestowal 
or  refusal  of  those  advantages  which  they  otherwise  lawfully 
control.  I  can  remember  when  many  people  thought  that, 
apart  from  violence  or  breach  of  contract,  strikes  were  wicked, 
as  organized  refusals  to   work.     I   suppose   that   intelligent 


THE  COMMON  LAW  453 

economists  and  legislators  have  given  up  that  notion  today.  I 
feel  pretty  confident  that  they  equally  will  abandon  the  idea 
that  an  organized  refusal  by  workmen  of  social  intercourse 
with  a  man  who  shall  enter  their  antagonist's  employ  is  un- 
lawful, if  it  is  dissociated  from  any  threat  of  violence,  and  is 
made  for  the  sole  object  of  prevailing,  if  possible,  in  a  contest 
with  their  employer  about  the  rate  of  wages.  The  fact  that 
the  immediate  object  of  the  act  by  which  the  benefit  to  them- 
selves is  to  be  gained  is  to  injure  their  antagonist  does  not 
necessarily  make  it  unlawful,  any  more  than  when  a  great 
house  lowers  the  price  of  goods  for  the  purpose  and  with  the 
effect  of  driving  a  smaller  antagonist  from  the  business.  In- 
deed, the  question  seems  to  me  to  have  been  decided  as  long 
ago  as  1842,  by  the  good  sense  of  Chief  Justice  Shaw,  in 
Com.  V,  Hunt,  4  Mete.  (Mass.)  111.  I  repeat  at  the  end,  as  I 
said  at  the  beginning,  that  this  is  the  point  of  difference  in 
principle,  and  the  only  one,  between  the  interlocutory  and  final 
decree;  and  I  only  desire  to  add  that  the  distinctions  upon 
which  the  final  decree  was  framed  seem  to  me  to  have  coin- 
cided very  accurately  with  the  results  finally  reached  by  legis- 
lation and  judicial  decision  in  England,  apart  from  what  I 
must  regard  as  the  anomalous  decisions  of  Temperton  v,  Rus- 
sell and  the  cases  which  have  followed  it.  Reg.  v.  Shepherd, 
11  Cox,  Cr.  Cas.  325;  Connor  v.  Kent,  Gibson  v.  Lawson,  and 
Curran  v.  Treleaven,  17  Cox,  Cr.  Cas.  354. 

The  general  question  of  the  propriety  of  dealing  with  this 
kind  of  case  by  injunction  I  say  nothing  about,  because  I  un- 
derstand that  the  defendants  have  no  objection  to  the  final 
decree  if  it  goes  no  further,  and  that  both  parties  wish  a  de- 
cision upon  the  matters  which  I  have  discussed. 


BERRY  v.  DONOVAN 
(Supreme  Judicial  Court  of  Mass.,  1905.     188  Mass.  353.) 

Exceptions  from  Supreme  Judicial  Court,  Essex  County. 

Action  by  one  Berry  against  one  Donovan.  There  was  a 
verdict  for  plaintiff,  and  defendant  excepted.  Exceptions 
overruled. 


454    COIMBINATIONS  AND  RESTRAINT  OF  TRADE 

KNOWLTON,  C.  J.  This  is  an  action  of  tort,  brought  to 
recover  damages  sustained  by  reason  of  the  defendant's  ma- 
licious interference  with  the  plaintiff's  contract  of  employ- 
ment. The  plaintiff  was  a  shoemaker,  employed  by  the  firm 
of  Hazen  B.  Goodrich  &  Co.  at  Haverhill,  Mass.,  under  a  con- 
tract terminable  at  will.  At  the  time  of  the  interference  com- 
plained of  he  had  been  so  employed  nearly  four  years.  The 
defendant  was  the  representative  at  Haverhill  of  a  national 
organization  of  shoe  workers,  called  the  Boot  and  Shoe  Work- 
ers' Union,  of  which  he  was  also  a  member.  The  evidence 
showed  that  he  induced  Goodrich  &  Co.  to  discharge  the  plain- 
tiff, greatly  to  his  damage.  A  few  days  before  the  plaintiff's 
discharge  a  contract  was  entered  into  between  the  Boot  and 
Shoe  Workers'  Union  and  the  firm  of  Goodrich  &  Co.,  which 
was  signed  by  the  defendant  for  the  union,  the  second  clause 
of  which  was  as  follows:  "In  consideration  of  the  foregoing 
valuable  privileges,  the  employer  agrees  to  hire,  as  shoe  work- 
ers, only  members  of  the  Boot  and  Shoe  Workers'  Union  in 
good  standing,  and  further  agrees  not  to  retain  any  shoe 
worker  in  his  employment  after  receiving  notice  from  the  union 
that  such  shoe  worker  is  objectionable  to  the  union,  either  on 
account  of  being  in  arrears  for  dues,  or  disobedience  of  union 
rules  or  laws,  or  from  any  other  cause."  The  contract  con- 
tained various  other  provisions  in  regard  to  the  employment 
of  members  of  the  union  by  the  firm,  and  the  rights  of  the  firm 
and  of  the  union  in  reference  to  the  services  of  these  employes, 
and  the  use  of  the  union's  stamp  upon  goods  to  be  manufac- 
tured. 

The  plaintiff  was  not  a  member  of  this  union.  Soon  after 
the  execution  of  this  contract  the  defendant  demanded  of 
Goodrich  &  Co.  that  the  plaintiff  be  discharged,  and  the  evi- 
dence tended  to  show  that  the  sole  ground  for  the  demand 
was  that  the  plaintiff  was  not  a  member  of  the  union,  and 
that  he  persistently  declined  to  join  it  after  repeated  sugges- 
tions that  he  should  do  so. 

At  the  close  of  the  evidence  the  defendant  asked  for  the 
following  instructions,  which  the  judge  declined  to  give: 

"(1)  Upon  all  the  evidence  in  the  case  the  plaintiff  is  not 
entitled  to  recover. 

*'(2)  Upon  all  the  evidence  in  the  case  the  defendant  was 


THE  COMMON  LAW  455 

acting  as  the  legal  representative  of  the  Boot  and  Shoe  Work- 
ers' Union,  and  not  in  his  personal  capacity,  and  therefore  the 
plaintiff  cannot  recover. 

"(3)  The  contract  between  the  Boot  and  Shoe  Workers' 
Union  and  Hazen  B.  Goodrich  &  Co.  was  a  valid  contract,  and 
the  defendant,  as  the  legal  representative  of  the  Boot  and  Shoe 
Workers'  Union,  had  a  right  to  call  the  attention  of  Hazen  B. 
Goodrich  &  Co.,  or  any  member  of  the  firm,  to  the  fact  that 
they  were  violating  the  terms  of  the  contract  in  keeping  the 
plaintiff  in  their  employment  after  the  contract  was  signed, 
and  insisting  upon  an  observance  of  the  terms  of  the  contract, 
even  if  the  defendant  knew  that  the  observance  of  the  terms 
of  the  contract  would  result  in  the  discharge  of  the  plaintiff 
from  their  employment. 

*'(4)  The  contract  referred  to  was  a  legal  contract,  and  a 
justification  of  the  acts  of  the  defendant,  as  shown  by  the  evi- 
dence in  this  case. 

"  (6)  The  defendant  cannot  be  held  responsible  in  this  action 
unless  it  appears  that  the  defendant  used  threats,  or  some  act 
of  intimidation,  or  some  slanderous  statements,  or  some  un- 
lawful coercion  to  or  against  the  employers  of  the  plaintiff,  to 
thereby  cause  the  plaintiff's  discharge;  and  upon  all  the  evi- 
dence in  the  case  there  is  no  such  evidence,  and  the  plaintiff 
cannot  recover." 

The  defendant  excepted  to  the  refusal,  and  to  the  portions 
of  the  charge  which  were  inconsistent  with  the  instructions 
requested.  The  jury  returned  a  verdict  of  $1,500  for  the 
plaintiff.  These  exceptions  present  the  only  questions  which 
were  argued  before  us  by  the  defendant. 

The  primary  right  of  the  plaintiff  to  have  the  benefit  of  his 
contract  and  to  remain  undisturbed  in  the  performance  of  it 
is  universally  recognized.  The  right  to  dispose  of  one's  labor 
as  he  will,  and  to  have  the  benefit  of  one's  lawful  contracts,  is 
incident  to  the  freedom  of  the  individual,  which  lies  at  the 
foundation  of  the  government  in  all  countries  that  maintain 
the  principles  of  civil  liberty.  Such  a  right  can  lawfully  be 
interfered  with  only  by  one  who  is  acting  in  the  exercise  of 
an  equal  or  superior  right  which  comes  in  conflict  with  the 
other.  An  intentional  interference  with  such  a  right  without 
lawful  justification  is  malicious  in  law,  even  if  it  is  from  good 


456    CO^IBINATIONS  AND  RESTRAINT  OF  TRADE 

motives  and  without  express  malice.  Walker  v.  Cronin,  107 
Mass.  555-562 ;  Plant  v.  Woods,  176  Mass.  492-498,  51  L.  R.  A. 
339,  79  Am.  St.  Rep.  330;  Allen  v.  Flood  (1898)  A.  C.  1-18; 
Mogul  Steamship  Company  v.  McGregor,  23  Q.  B.  D.  598-613 ; 
Read  v.  Friendly  Society  of  Operative  Stone  Masons  (1902)  2 
K.  B.  88-96;  Giblan  v.  National  Amalgamated  Union  (1903) 
2  K.  B.  600-617. 

In  the  present  case  the  judge  submitted  to  the  jury,  first, 
the  question  whether  the  defendant  interfered  with  the  plain- 
tiff's rights  under  his  contract  with  Goodrich  &  Co.;  and, 
secondly,  the  question  whether,  if  he  did,  the  interference  was 
without  justifiable  cause.  The  jury  were  instructed  that,  un- 
less the  defendant's  interference  directly  caused  the  termina- 
tion of  the  plaintiff's  employment,  there  could  be  no  recovery. 
The  substance  of  the  defendant's  contention  was  that  if  he 
acted  under  the  contract  between  the  Boot  and  Shoe  Workers' 
Union  and  the  employer  in  procuring  the  plaintiff's  discharge, 
his  interference  was  lawful. 

This  contention  brings  us  to  an  examination  of  the  contract, 
Tha.t  part  which  relates  to  the  persons  to  be  employed  con- 
tains, first,  a  provision  that  the  employer  will  hire  only  mem- 
bers of  the  union.  This  has  no  application  to  the  plaintiff's 
case,  for  it  is  an  agreement  only  for  the  future,  and  the  plain- 
tiff had  been  hired  a  long  time  before.  The  next  provision  is 
that  the  employer  will  not  retain  in  his  employment  a  worker, 
after  receiving  notice  that  he  is  objectionable  to  the  union, 
"either  on  account  of  being  in  arrears  for  dues,  or  disobedi- 
ence of  union  rules  or  laws,  or  from  any  other  cause."  The 
first  two  possible  causes  for  objection  could  not  be  applied  to 
persons  in  the  situation  of  the  plaintiff,  who  were  not  mem- 
bers of  the  union  or  amenable  to  its  laws.  As  to  such  persons 
the  only  provision  applicable  was  that  the  firm  would  not  retain 
a  worker  who  was  objectionable  to  the  union  from  any  cause, 
however  arbitrary  the  objection  or  unreasonable  the  cause 
might  be.  This  provision  purported  to  authorize  the  union  to 
interfere  and  deprive  any  workman  of  his  employment  for  no 
reason  whatever,  in  the  arbitrary  exercise  of  its  power.  What- 
ever the  contracting  parties  may  do  if  no  one  but  themselves 
is  concerned,  it  is  evident  that,  as  against  the  workman,  a  con- 
tract of  this  kind  does  not  of  itself  justify  interference  with 


THE  COMMON  LAW  457 

his  employment  by  a  third  person  who  made  the  contract  with 
his  employer.  Curran  v.  Galen,  152  N.  Y.  33,  37  L.  R.  A.  802, 
57  Am.  St.  Rep.  496.  No  one  can  legally  interfere  with  the 
employment  of  another  unless  in  the  exercise  of  some  right 
of  his  own,  which  the  law  respects.  His  will  so  to  interfere 
for  his  own  gratification  is  not  such  a  right. 

The  judge  rightly  left  to  the  jury  the  question  whether,  in 
view  of  all  the  circumstances,  the  interference  was  or  was  not 
for  a  justifiable  cause.  If  the  plaintiff's  habits  or  conduct  or 
character  had  been  such  as  to  render  him  an  unfit  associate  in 
the  shop  for  ordinary  workmen  of  good  character,  that  would 
have  been  a  sufficient  reason  for  interference  in  behalf  of  his 
shopmates.  We  can  conceive  of  other  good  reasons.  But  the 
evidence  tended  to  show  that  the  only  reason  for  procuring 
his  discharge  was  his  refusal  to  join  the  union.  The  question, 
therefore,  is  whether  the  jury  might  find  that  such  an  inter- 
ference was  unlawful. 

The  only  argument  that  we  have  heard  in  support  of  inter- 
ference by  labor  unions  in  cases  of  this  kind  is  that  it  is  justi- 
fiable as  a  kind  of  competition.  It  is  true  that  fair  competition 
in  business  brings  persons  into  rivalry,  and  often  justifies 
action  for  one's  self  which  interferes  with  proper  action  of 
another.  Such  action  on  both  sides  is  the  exercise  by  com- 
peting persons  of  equal  conflicting  rights.  The  principle  ap- 
pealed to  would  justify  a  member  of  the  union,  who  was  seek- 
ing employment  for  himself,  in  making  an  offer  to  serve  on 
such  terms  as  would  result,  and  as  he  knew  would  result,  in 
the  discharge  of  the  plaintiff  by  his  employer,  to  make  a  place 
for  the  new  comer.  Such  an  offer,  for  such  a  purpose,  would 
be  unobjectionable.  It  would  be  merely  the  exercise  of  a 
personal  right,  equal  in  importance  to  the  plaintiff's  right. 
But  an  interference  by  a  combination  of  persons  to  obtain  the 
discharge  of  a  workman  because  he  refuses  to  comply  with 
their  wishes,  for  their  advantage,  in  some  matter  in  which  he 
has  a  right  to  act  independently,  is  not  competition.  In  such 
a  case  the  action  taken  by  the  combination  is  not  in  the  regular 
course  of  their  business  as  employes,  either  in  the  service  in 
which  they  are  engaged  or  in  an  effort  to  obtain  employment 
in  other  service.  The  result  which  they  seek  to  obtain  cannot 
come  directly  from  anything  that  they  do  vrithin  the  regular 


458    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

line  of  their  business  as  workers  competing  in  the  labor  market. 
It  can  only  come  from  action  outside  of  the  province  of  work- 
ingmen,  intended  directly  to  injure  another,  for  the  purpose 
of  compelling  him  to  submit  to  their  dictation. 

It  is  difficult  to  see  how  the  object  to  be  gained  can  come 
within  the  field  of  fair  competition.  If  we  consider  it  in  refer- 
ence to  the  right  of  employes  to  compete  with  one  another, 
inducing  a  person  to  joiu  a  union  has  no  tendency  to  aid  them 
in  such  competition.  Indeed,  the  object  of  organizations  of 
this  kind  is  not  to  make  competition  of  employes  with  one 
another  more  easy  or  successful.  It  is  rather,  by  association, 
to  prevent  such  competition,  to  bring  all  to  equality  and  to 
make  them  act  together  in  a  common  interest.  Plainly,  then, 
interference  with  one  working  under  a  contract,  with  a  view 
to  compel  him  to  join  a  union,  cannot  be  justified  as  a  part  of 
the  competition  of  workmen  with  one  another. 

We  understand  that  the  attempted  justification  rests  en- 
tirely upon  another  kind  of  so-called  competition,  namely,  com- 
petition between  employers  and  the  employed,  in  the  attempt 
of  each  class  to  obtaiu  as  large  a  share  as  possible  of  the  in- 
come from  their  combined  efforts  in  the  industrial  field.  In  a 
strict  sense  this  is  hardly  competition.  It  is  a  struggle  or  con- 
tention of  interests  of  different  kiuds,  which  are  in  opposition, 
so  far  as  the  division  of  profits  is  concerned.  In  a  broad  sense, 
perhaps,  the  contending  forces  may  be  called  competitors.  At 
all  events,  we  may  assume  that,  as  between  themselves,  the 
principle  which  warrants  competition  permits  also  reasonable 
efforts,  of  a  proper  kind,  which  have  a  direct  tendency  to 
benefit  one  party  in  his  business  at  the  expense  of  the  other. 
It  is  no  legal  objection  to  action  whose  direct  effect  is  helpful 
to  one  of  the  parties  in  the  struggle  that  it  is  also  directly 
detrimental  to  the  other.  But  when  action  is  directed  against 
the  other  primarily  for  the  purpose  of  doing  him  harm,  and 
thus  compelling  him  to  yield  to  the  demand  of  the  actor,  and 
this  action  does  not  directly  affect  the  property  or  business  or 
status  of  the  actor,  the  case  is  different,  even  if  the  actor  ex- 
pects to   derive   a  remote   or  indirect  benefit   from  the   act. 

The  gain  which  a  labor  union  may  expect  to  derive  from 
inducing  others  to  join  it  is  not  an  improvement  to  be  obtained 
directly  in  the  conditions  under  which  the  men  are  working, 


THE  COM]\ION  LAW  459 

but  only  added  strength  for  such  contests  with  employers  as 
may  arise  in  the  future.  An  object  of  this  kind  is  too  remote 
to  be  considered  a  benefit  in  business,  such  as  to  justify  the 
infliction  of  intentional  injury  upon  a  third  person  for  the  pur- 
pose of  obtaining  it.  If  such  an  object  were  treated  as  legiti- 
mate, and  allowed  to  be  pursued  to  its  complete  accomplish- 
ment, every  employe  would  be  forced  into  membership  in  a 
union,  and  the  unions,  by  a  combination  of  those  in  different 
trades  and  occupations,  would  have  complete  and  absolute  con- 
trol of  all  the  industries  of  the  country.  Employers  would  be 
forced  to  yield  to  all  their  demands  or  give  up  business.  The 
attainment  of  such  an  object  in  the  struggle  with  employers 
would  not  be  competition,  but  monopoly.  A  monopoly,  con- 
trolling anything  which  the  world  must  have,  is  fatal  to  pros- 
perity and  progress.  In  matters  of  this  kind  the  law  does  not 
tolerate  monopolies.  The  attempt  to  force  all  laborers  to  com- 
bine in  unions  is  against  the  policy  of  the  law,  because  it  aims 
at  monopoly.  It  therefore  does  not  justify  causing  the  dis- 
charge, by  his  employer,  of  an  individual  laborer  working  un- 
der a  contract.  It  is  easy  to  see  that  for  different  reasons  an 
act  which  might  be  done  in  legitimate  competition  by  one  or 
two  or  three  persons,  each  proceeding  independently,  might 
take  on  an  entirely  different  character,  both  in  its  nature  and 
its  purpose,  if  done  by  hundreds  in  combination. 

We  have  no  desire  to  put  obstacles  in  the  way  of  employes 
who  are  seeking  by  combination  to  obtain  better  conditions 
for  themselves  and  their  families.  We  have  no  doubt  that 
laboring  men  have  derived  and  may  hereafter  derive  advan- 
tages from  organization.  We  only  say  that  under  correct  rules 
of  law,  and  with  a  proper  regard  for  the  rights  of  individuals, 
labor  unions  cannot  be  permitted  to  drive  men  out  of  employ- 
ment because  they  choose  to  work  independently.  If  disagree- 
ments between  those  who  furnish  the  capital  and  those  who 
perform  the  labor  employed  in  industrial  enterprises  are  to  be 
settled  only  by  industrial  wars,  it  would  give  a  great  ad- 
vantage to  combinations  of  employes,  they  could  be  permitted 
by  force  to  obtain  a  monopoly  of  the  labor  market.  But  we 
are  hopeful  that  this  kind  of  warfare  will  soon  give  way  to 
industrial  peace,  and  that  rational  methods  of  settling  such 
controversies  wiU  be  adopted  universally. 


460    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

The  fact  that  the  plaintiff's  contract  was  terminable  at  will, 
instead  of  ending  at  a  stated  time,  does  not  affect  his  right  to 
recover.  It  only  affects  the  amount  that  he  is  to  receive  as 
damages.  Moran  v.  Dunphy,  177  Mass.  485-487,  59  N.  E.  125, 
52  L.  R.  A.  115,  83  Am.  St.  Rep.  289 ;  Perkins  v.  Pendleton,  90 
Me.  166-176,  38  Atl.  96,  60  Am.  St.  Rep.  252 ;  Lucke  v.  Clothing 
Cutters  Association,  77  Md.  396,  26  Atl.  505,  19  L.  R.  A.  408, 
39  Am.  St.  Rep.  421 ;  London  Guarantee  Company  v.  Horn,  101 
111.  App.  355 ;  Id.,  206  111.  493,  99  Am.  St.  Rep.  185. 

The  conclusion  which  we  have  reached  is  well  supported  by 
authority.  The  principle  invoked  is  precisely  the  same  as  that 
which  lies  at  the  foundation  of  the  decision  in  Plant  v.  Woods, 
176  Mass.  492,  51  L.  R.  A.  339,  79  Am.  St.  Rep.  330.  In  that 
case,  although  the  power  that  lies  in  combination  and  the 
methods  often  adopted  by  labor  unions  in  the  exercise  of  it 
were  stated  with  great  clearness  and  ability,  the  turning  point 
of  the  decision  is  found  in  this  statement  on  page  502,  176 
Mass.,  page  1015,  57  N.  E.,  51  L.  R.  A.  339,  79  Am.  St.  Rep. 
330:  "The  necessity  that  the  plaintiffs  should  join  this  asso- 
ciation is  not  so  great,  nor  is  its  relation  to  the  rights  of  the 
defendants,  as  compared  with  the  right  of  the  plaintiffs  to  be 
free  from  molestation,  such  as  to  bring  the  acts  of  the  defend- 
ants under  the  shelter  of  the  principles  of  trade  competition." 
Carew  v.  Rutherford,  106  Mass.  1,  8  Am.  Rep.  -287,  Walker  v. 
Cronin,  107  Mass.  555,  and  the  other  cases  cited  in  Plant  v. 
Woods,  uM  supra,  as  well  as  the  later  case  of  Martell  v.  White, 
185  Mass.  255,  64  L.  R.  A.  260,  all  tend  to  support  us  in  our 
decision. 

We  have  long  had  a  statute  forbidding  the  coercion  or  com- 
pulsion by  any  person  of  any  other  ''person  into  a  written  or 
verbal  agreement  not  to  join  or  become  a  member  of  a  labor 
organization  as  a  condition  of  his  securing  employment  or  con- 
tinuing in  the  employment  of  such  person."  Rev.  Laws,  c. 
106,  §  12.  The  same  principle  would  justify  a  prohibition  of 
the  coercion  or  compulsion  of  a  person  into  a  written  or  verbal 
agreement  to  join  such  an  organization  as  a  condition  of  his 
securing  employment,  or  continuing  in  the  employment  of 
another  person. 

The  latest  English  cases,  which  explain  and  modify  Allen  v. 
Flood  (1898)  A.  C.  1,  seem  in  harmony  with  our  conclusion. 


THE  COMMON  LAW  461 

Giblan  v.  National  Amalgamated  Union  (1903)  2  K.  B.  600; 
Quinn  v.  Leatham  (1901)  A.  C.  495.  In  the  first  of  these  it 
was  held  that  a  labor  union  could  not  use  its  power  to  deprive 
one  of  employment,  in  order  to  compel  him  to  pay  a  debt  in 
which  the  union  was  interested.  The  case  of  Curran  v.  Galen, 
152  N.  Y.  33,  37  L.  R.  A.  802,  57  Am.  St.  Rep.  496,  in  the  de- 
cision of  which  the  judges  of  the  Court  of  Appeals  were  unani- 
mous, fully  covers  the  present  case.  The  principle  involved 
in  each  of  the  two  cases  is  the  same,  and  the  language  of  the 
opinion  in  that  case,  in  its  application  to  this,  is  decisive.  From 
the  decision  of  National  Protective  Association  v.  Cummiug, 
170  N.  Y.  315,  58  L.  R.  A.  135,  88  Am.  St.  Rep.  648,  three  of  the 
seven  judges  dissented,  and  the  result  is  to  leave  the  law  of 
New  York  in  some  uncertainty.  The  majority  distinguished 
that  case  from  Curran  v.  Galen,  just  referred  to,  and  held  that 
their  decision  was  not  inconsistent  with  it.  They  seem  to  have 
treated  the  arrangement  to  exclude  persons  not  belonging,  to 
the  union  as  entered  into  for  legitimate  purposes,  having  refer- 
ence to  actual  or  probable  conditions  in  the  employment ;  while 
the  minority  treated  it  as  similar  to  the  arrangement  that 
appears  in  Curran  v.  Galen.  See,  also,  Jacobs  v.  Cohen  (Sup.) 
90  N.  Y.  Supp.  854;  Mills  et  al.  v.  United  States  Printing 
Company  (Sup.,  Dec.  15,  1904)  91  N.  Y.  Supp.  184. 

The  law  of  Illinois  is  in  accord  with  our  conclusion.  In 
London  Guarantee  Co.  v.  Horn,  101  111.  App.  355,  Id.,  206  lU. 
493,  99  Am.  St.  Rep.  185,  it  was  held  that  a  refusal  of  a 
workman  to  accede  to  the  request  of  another  in  a  matter 
affecting  the  pecuniary  interest  of  the  other  would  not  jus- 
tify the  procurement  of  his  discharge  from  the  employment 
in  which  he  was  engaged  under  a  contract  terminable  at 
wiU.  See,  also,  for  kindred  doctrines,  Doremus  v.  Hen- 
nessey, 176  111.  608,  42  L.  R.  A.  797,  802,  68  Am.  St. 
Rep.  203;  Christensen  v.  The  People,  114  111.  App.  40; 
Matthews  v.  The  People,  202  111.  389,  63  L.  R.  A.  73, 
95  Am.  St.  Rep.  241;  Erdman  v.  MitcheU,  207  Pa.  79, 
63  L.  R.  A.  534,  99  Am.  St.  Rep.  783 ;  Perkons  v.  Pendleton, 
90  Me.  166,  38  Atl.  96,  60  Am.  St.  Rep.  252.  Other  cases 
bearing  more  or  less  directly  upon  the  general  subject  are 
Lucke  V.  Clothing  Cutters'  Association,  77  Md.  396,  19  L.  R. 
A.  408,  39  Am.  St.  Rep.  421;  Holder  v.  Cannon  Manufactur- 


462    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ing  Company,  135  N.  C.  392,  65  L.  R.  A.  161;  Chipley  v. 
Atkinson,  23  Fla.  206,  1  South.  934,  11  Am.  St.  Rep.  367; 
Blumenthal  v.  Shaw,  77  Fed.  954,  23  C.  C.  A,  590;  Barr  v. 
The  Essex  Trades  Council,  53  N.  J.  Eq.  101 ;  Jersey  City  Print- 
ing Company  v.  Cassidy,  63  N.  J.  Eq.  759;  Crump  v.  Com., 
84  Va.  927,  10  Am.  St.  Rep.  839;  Old  Dominion  Steamship 
Company  v.  McKenna  (C.  C.)  30  Fed.  48;  Brown  and  Allen 
V.  Jacobes  Pharmacy  Company,  115  Ga.  429,  57  L.  R.  A.  547, 
90  Am.  St.  Rep.  126;  Bailey  v.  Master  Plumbers'  Association, 
103  Tenn.  99,  46  L.  R.  A.  561 ;  Delz  v.  Winfree,  80  Tex.  400, 
16  S.  W.  Ill,  26  Am.  St.  Rep.  755.  It  will  be  seen  that  in  the 
different  courts  there  is  considerable  variety  and  some  conflict 
of  opinion. 

We  hold  that  the  defendant  was  not  justified  by  the  con- 
tract with  Goodrich  &  Co.,  or  by  his  relations  to  the  plaintiff, 
in  interfering  with  the  plaintiff's  employment  under  his 
contract.  How  far  the  principles  which  we  adopt  would  ap- 
ply, under  different  conceivable  forms  of  contract,  to  an  inter- 
ference with  a  workman  not  engaged,  but  seeking  employ- 
ment, or  to  different  methods  of  boycotting,  we  have  no  occa- 
sion in  this  case  to  decide. 

The  defendant  contends  that  the  judge  erred  in  his  instruc- 
tion to  the  jury  in  response  to  the  defendant's  special 
request  at  the  close  of  the  charge.  The  judge  said,  in  sub- 
stance, that  if  the  defendant  caused  the  firm  to  discharge  the 
plaintiif  by  giving  the  members  to  understand  that,  unless  they 
discharged  him,  they  "would  be  visited  with  some  punish- 
ment, under  the  contract  or  otherwise,  then  that  interference 
would  not  be  justifiable."  This  instruction,  taken  literally 
and  alone,  would  be  erroneous.  Some  grounds  of  interference 
would  be  justifiable,  while  others  would  not.  But  consider- 
ing the  instruction  in  connection  with  that  which  immediately 
preceded  it,  and  with  other  parts  of  the  charge,  it  is  evident 
that  the  judge  was  directing  the  attention  of  the  jury  to  what 
would  constitute  an  interference,  not  to  what  would  justify 
an  interference.  He  had  just  told  them  that,  if  all  the  de- 
fendant did  was  to  caU  the  attention  of  the  firm  to  the  pro- 
vision of  the  contract,  and  the  firm  then,  of  their  own  motion, 
discharged  the  plaintiff',  the  defendant  would  not  be  liable. 
He  then  pursued  the  subject  with  some  elaboration,  and  ended 


THE  COMIVION  LAW  463 

as  stated  above.  Instead  of  saying,  "then  that  interference 
would  not  be  justifiable,"  he  evidently  meant  to  say,  "then 
that  would  be  interference  which  would  create  a  liability, 
unless  it  was  justifiable."  Taking  the  charge  as  a  whole,  we 
think  the  jury  were  not  misled  by  the  inaccuracy  of  this 
statement. 

Exceptions  overruled. 


MORE  V.  BENNETT 
(Supreme  Court  of  Illinois,  1892.     140  111.  69.) 

Appeal  from  appellate  court,  first  district. 

Action  by  R.  Wilson  More  and  others  against  J.  L.  Bennett 
and  others  for  damages  for  violation  of  rules  of  an  associa- 
tion of  which  both  parties  were  members.  Judgment  sus- 
taining a  demurrer  to  the  complaint  was  affirmed  by  the 
appellate  court.     Plaintiff  appeals.     Affirmed. 

The  other  facts  fully  appear  in  the  following  statement  by 
Bailey,  J. : 

This  was  a  suit  in  assumpsit  brought  by  R.  Wilson  More 
and  others,  composing  the  firm  of  More  &  Dundas,  against 
J.  L.  Bennett  and  others,  composing  the  firm  of  Bennett, 
Edwards  &  Pettit,  to  recover  damages  resulting  from  an 
alleged  breach  of  certain  rules  and  by-laws  of  the  Chicago 
Law  Stenographers'  Association,  of  which  both  the  plaintiffs 
and  defendants  are  members.  To  the  declaration,  which 
consists  of  two  special  counts,  a  demurrer  was  sustained,  and, 
the  plaintiffs  electing  to  abide  by  tlieir  declaration,  judgment 
was  rendered  in  favor  of  the  defendants  for  costs.  Said 
judgment  has  been  affirmed  by  the  appellate  court  on  ap- 
peal, and  the  present  appeal  is  from  said  judgment  of  affirm- 
ance. 

The  first  count  of  the  declaration  alleges,  ip  substance,  that 
the  plaintiffs  and  defendants  are  all  stenographers  by  pro- 
fession, and  have,  from  the  time  of  its  organization,  been 
members  of  said  association,  an  association  formed  to  pro- 
mote the  interest  of  its  members  by  all  proper  methods,  and 
to  establish  and  maintain   reasonable,   proper,   and   uniform 


464    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

rates  for  stenographic  work  done  by  the  members  of  said  as- 
sociation, and  to  secure  to  judges,  lawyers,  and  citizens  of 
Chicago  efficient,  competent,  and  reliable  law  reporting,  at 
reasonable,  proper,  and  uniform  rates,  and  to  furnish  them 
with  the  means  of  obtaining  efficient  and  competent  reporters, 
and  to  increase  the  efficiency  of  law  reporting  in  the  county 
of  Cook,  That,  in  accordance  with  its  constitution  and  by- 
laws, said  association  had  adopted  a  schedule  of  rates  which 
were  and  are  fair  and  reasonable,  and  had  for  more  than 
15  years  prior  to  the  organization  of  said  association  been 
the  established  rates  among  law  stenographers,  and  had  been 
and  are  still  recognized  as  reasonable  and  established  rates 
by  judges  and  members  of  the  legal  fraternity,  and  by  law 
stenographers  of  the  city  of  Chicago,  there  having  been  dur- 
ing said  time  no  material  variation  from  said  rates  among 
law  stenographers,  said  rates  being  less  than  those  estab- 
lished in  certain  other  large  cities  of  the  United  States  for  the 
same  class  of  work. 

Said  count  further  alleges  that,  in  consideration  of  like 
promises  and  agreements  on  the  part  of  the  plaintiffs,  and 
like  payment  of  the  membership  fee  of  $5  by  each  of  the 
plaintiffs  to  become  members  of  said  association,  the  defend- 
ants promised  and  agreed  with  the  plaintiffs  that  they  would 
be  bound  in  their  charges  for  work  by  the  schedule  of  rates 
adopted  by  said  association.  That  the  defendants  might  cut 
rates  against  persons  not  members  of  said  association,  pro- 
vided such  cutting  was  in  good  faith  and  the  rights  of  the 
plaintiffs  were  respected.  That  in  no  case  where  the  de- 
fendants had  any  knowledge  of  the  existence  of  a  contract 
or  reporting  arrangement  between  the  plaintiffs  and  any  law- 
yer, corporation,  or  any  other  person  would  they  attempt,  by 
underbidding  the  rate  established  by  said  association  or  other 
unfair  means,  to  secure  such  reporting. 

That  the  rates  established  by  said  association  were  as  fol- 
lows: 

Not  less  than  20  cents  per  folio  for  single  copy;  not  less 
than  25  cents  per  folio  for  two  copies ;  not  less  than  28  cents 
per  folio  for  three  copies;  and  the  rate  of  $10  per  day  for 
attendance,  with  the  qualification  that,  if  a  reporter  was 
engaged  by  one  of  the  parties  to  a  suit,  he  or  any  other  re- 


THE  COMMON  LAW  465 

porter,  knowing  of  such  engagement,  might  take  the  other 
side  of  the  case  for  $5  per  day;  but  in  no  case  should  the 
reporter  make  any  offer  to  any  attorney  after  being  informed 
by  such  attorney  that  he  had  engaged  a  reporter. 

That  while  said  association  was  in  existence,  and  the  plain- 
tiffs and  defendants  were  members  thereof,  the  plaintiffs  en- 
tered into  a  contract  or  reporting  arrangement  with  the 
county  of  Cook,  by  which  said  county  employed  the  plaintiffs 
to  report  the  proceedings  and  furnish  transcripts  thereof,  as 
said  county  should  require,  in  a  certain  celebrated  murder 
case  then  pending  in  the  criminal  court  of  Cook  county,  to- 
wit.,  the  case  of  The  People  v.  0 'Sullivan  and  others,  known 
as  the  "Cronin  Trial,"  said  employment  by  said  county 
being  on  the  following  terms,  to-wit,  $10  per  day  for  attend- 
ance, and  the  regular  rates  for  transcripts  as  established  by 
said  association,  the  plaintiffs  agreeing  with  said  county  to  do 
said  work,  if  the  county  should  demand  it,  at  as  low  a  rate 
as  any  reputable  and  established  stenographer  or  firm  of 
stenographers  should  in  good  faith  bid  for  said  work. 

That  the  plaintiff's  entered  upon  the  performance  of  said 
contract,  and  were  engaged  in  reporting  the  proceedings  at 
said  trial  at  said  regular  rates,  yet  the  defendants,  well  know- 
ing the  premises,  and  the  aforesaid  contract  or  reporting  ar- 
rangement between  the  plaintiffs  and  said  county,  and  after 
tlie  plaintiffs  had  been  engaged  on  said  case  for,  to-wit,  seven 
weeks,  and  at  a  time  when  defendants  well  knew  that  the 
plaintiff  had  performed  the  most  unprofitable  part  of  said 
contract,  and  not  regarding  their  said  promise  so  made  to 
the  plaintiffs,  did  not  respect  the  rights  of  the  plaintiffs  and 
the  schedule  rates  so  adopted  by  said  association,  and  the 
fact  that  they  knew  that  there  was  a  reporting  arrangement 
or  contract  between  the  plaintiffs  and  said  county,  but  so- 
licited said  county,  and  endeavored  to  secure  from  said 
county,  by  underbidding  and  other  unfair  means,  employ- 
ment as  law  stenographers  to  report  and  furnish  transcripts 
of  the  proceedings  at  said  trial,  and  made  a  certain  bid 
to  said  county,  by  which  they  offered  to  do  said  work  at  a 
less  rate  than  that  established  by  said  association,  to-wit,  $5 
per  day  for  attendance,  20  cents  per  folio  for  a  single  copy,  22 

Kaiea  R.  o(  T.  Vol.  ?— 3q 


466    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

cents  per  folio  for  two  copies,  and  all  copies  above  two  free  of 
charge. 

That  thereupon  the  plaintiffs,  because  of  said  bid  by  the 
defendants,  were  required  by  said  county  to  meet  said  bid, 
or  to  cease  their  employment  on  said  trial,  as  by  the  terms 
of  said  employment  said  county  had  a  right  to  do ;  and  that 
the  plaintiffs,  for  the  purpose  of  remaining  in  employment 
on  said  trial,  did  meet  the  said  bid  of  the  defendants,  and 
afterwards  reported  and  furnished  transcripts  of  the  pro- 
ceedings on  said  trial  at  the  rates  offered  by  the  defendants; 
by  means  whereof  they  were  deprived  of  divers  gains  and 
profits  which  would  have  accrued  to  them  from  the  reporting 
and  furnishing  transcripts  on  said  trial  under  the  regular 
rates  of  said  association,  and  in  accordance  with  their  orig- 
inal bid,  and  have  suffered  great  loss  and  damage  through 
the  wrongful  conduct  of  the  defendants,  to  the  damage  of 
the  plaintiffs  in  the  sum  of  $3,000;  and  therefore  they  bring 
their  suit,  etc. 

The  second  count  contains  substantially  the  same  allega- 
tions as  the  first,  and  also  the  following:  That  said  associa- 
tion numbers  among  its  members  only  a  small  portion  of  the 
law  stenographers  of  the  city  of  Chicago,  and  that  said  asso- 
ciation was  formed  because  a  system  of  ruinous  competition 
had  sprang  up  among  the  stenographers  of  said  city  by  which 
the  prices  of  stenographic  work  were  depressed  below  reason- 
able rates,  and  also  because  a  discreditable  and  dishonorable 
system  of  solicitation  for  business  had  sprung  up,  by  which 
efforts  were  made  on  the  part  of  stenographers  to  induce 
attorneys,  corporations,  and  other  persons  to  break  their  con- 
tracts already  made  with  other  stenographers,  and  that  the 
objects  of  said  association  were  to  prevent  said  discreditable 
and  dishonorable  solicitation,  and  to  promote  the  interests  of 
the  members  thereof  by  all  proper  methods,  and  to  establish 
and  maintain  proper  and  uniform  rates  for  stenographic 
vrork  done  by  its  members. 

Said  second  count  also  set  out,  in  extenso,  the  constitution, 
by-laws,  and  schedule  of  rates  of  said  association,  said  con- 
stitution containing,  among  other  things,  the  following  pro- 
visions: "The  objects  of  this  association  shall  be  to  promote 
the  interests  of  the  members  thereof  by  all  proper  methods, 


THE  COMMON  LAW  467 

particularly  to  establish  and  maintain  proper  rates  for  sten- 
ographic work  done  by  members  of  the  association. 

"Any  reputable  stenographer,  regularly  engaged  in  law  re- 
porting in  Cook  county,  shall  be  eligible  to  membership  under 
the  rules  hereinafter  provided. 

"The  association  may  adopt  a  schedule  of  rates  to  be  charged 
by  the  members  for  stenographic  work  done  by  them,  which 
schedule  shall  be  binding  upon  every  member." 

Among  the  by-laws  adopted  by  said  association  were  the 
following : 

"The  membership  fee  shall  be  $5.  The  expenses  of  the  asso- 
ciation, above  amount  received  for  membership  fees,  shall  be 
paid  out  of  a  fund  to  be  collected  by  assessment,  to  be  levied 
by  the  board  of  directors  from  time  to  time  as  may  be  neces- 
sary. 

"The  members  of  this  association  shall  respect  each  other-'s 
rights,  and  in  no  case  where  a  member  has  knowledge  of  the 
existence  of  a  contract  or  reporting  arrangement  between  a 
fellow-member  and  a  lawyer,  corporation,  or  any  other  person 
shall  he  attempt,  by  underbidding  or  other  unfair  means,  to 
secure  such  reporting ;  but  members  of  this  association  may  cut 
rates  against  outsiders,  if  they  choose;  such  cutting,  however, 
must  be  done  in  good  faith,  or  the  member  will  be  liable  to  fine, 
as  provided  for  other  violations  of  the  constitution  and  by- 
laws. ' ' 

Said  by-laws  also  provide,  in  case  of  any  violation  of  the 
rules  of  said  association  by  any  of  its  members,  for  a  trial  of 
the  member  accused  of  such  violation  by  a  special  arbitration 
committee,  and  the  imposition  of  a  fine  in  case  of  conviction,  of 
not  less  than  $10,  nor  more  than  $25,  to  be  paid  into  the  treas- 
ury of  the  association,  with  the  right  on  the  part  of  the  accused 
to  an  appeal  to  a  meeting  of  the  entire  association  to  be  called 
for  that  purpose;  and  it  is  further  provided  that,  "in  cases 
where  the  differences  between  members  require  financial  ad- 
justment, the  said  arbitration  committee  shall  decide  between 
the  parties,"  with  right  of  appeal  from  the  decision  of  said 
committee  to  any  regular  or  special  meeting  of  the  association, 
whose  decision  in  the  matter  is  final. 

The  assignments  of  error  call  in  question  the  decision  of  the 
circuit  court  sustaining  the  demurrer  to  said  declaration. 


468    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Mr.  Justice  Bailey  delivered  the  opinion  of  the  Court: 
The  question  is  raised  by  counsel,  and  discussed  at  some  length, 
whether  membership  in  the  Chicago  Law  Stenographic  Associa- 
tion established  a  contractual  relation  between  the  plaintiffs  and 
defendants,  which  gives  to  the  plaintiffs  a  right  of  action  against 
the  defendants  for  a  violation  of  any  of  the  rules  of  said  associa- 
tion, as  for  a  breach  of  contract;  and  also  whether  the  only 
remedy  for  a  violation  of  said  rules  is  not  that  provided  by  the 
by-laws  of  the  association,  viz.,  a  fine,  to  be  imposed  upon  the 
offender,  after  a  trial  and  conviction  before  an  arbitration 
committee,  duly  appointed  for  that  purpose.  But,  as  we  view 
the  ease,  it  will  be  unnecessary  for  us  to  consider  these  ques- 
tions, since,  admitting  that  the  constitution  and  by-laws  of  the 
association  were  in  the  nature  of  a  contract  as  between  the 
members  iyiter  se,  we  are  of  the  opinion  that  the  contract  thus 
established  is  so  far  obnoxious  to  well-settled  rules  of  public 
policy  as  to  render  it  improper  for  the  courts  to  lend  their  aid 
to  its  enforcement. 

Whatever  may  be  the  professed  objects  of  the  association,  it 
clearly  appears,  both  from  its  constitution  and  by-laws,  and 
from  the  averments  of  the  declaration,  that  one  of  its  objects, 
if  not  its  leading  object,  is  to  control  the  prices  to  be  charged 
by  its  members  for  stenographic  work,  by  restraining  all  com- 
petition between  them.  Power  is  given  to  the  association  to 
fix  a  schedule  of  prices  which  shall  be  binding  upon  all  its 
members,  and  not  only  do  the  members,  by  assenting  to  the 
constitution  and  by-laws,  agree  to  be  bound  by  the  schedule 
thus  fixed,  but  their  competition  with  each  other,  either  by 
taking  or  offering  to  take  a  less  price,  is  punishable  by  the 
imposition  of  fines,  as  well  as  by  such  other  disciplinary  meas- 
ures as  associations  of  this  character  may  adopt  for  the  en- 
forcement of  their  rules. 

The  rule  of  public  policy  here  involved  is  closely  analogous  to 
that  which  declares  illegal  and  void  contracts  in  general  re- 
straint of  trade,  if  it  is  not,  indeed,  a  subordinate  application  of 
the  same  rule.  As  said  by  Mr.  Tiedeman:  "Following  the 
reason  of  the  rule  which  prohibits  contracts  in  restraint  of 
trade,  we  find  that  it  is  made  to  prohibit  all  contracts  which 
in  any  way  restrain  the  freedom  of  trade  or  diminish  competi- 
tion, or  regulate  the  prices  of  commodities,  or  services.    All 


THE  COmiON  LAW  469 

combinations  of  capitalists  or  of  workmen  for  the  purpose  of 
influencing  trade  in  their  especial  favor,  by  raising  or  reducing 
prices,  are  so  far  illegal  that  agreements  to  combine  cannot  be 
enforced  by  the  courts."    Tied.  Com.  Paper,  §  190. 

Many  cases  may  be  found  in  which  the  doctrine  here  stated 
has  been  laid  down  and  enforced.  Thus  in  Stanton  v.  Allen, 
5  Denio,  434,  where  an  association  among  the  whole  or  a  large 
part  of  the  proprietors  of  boats  on  the  Erie  and  Oswego  canals 
was  formed  upon  an  agreement  to  regulate  the  price  of  freight 
and  passage  by  a  uniform  scale  to  be  fixed  by  a  committee 
chosen  by  themselves,  and  to  divide  the  profits  of  their  business 
according  to  the  number  of  boats  employed  by  each,  with 
provisions  prohibiting  the  members  from  engaging  in  similar 
business  out  of  the  association,  it  was  held  that,  as  the  tendency 
of  such  agreement  was  to  increase  prices  and  to  prevent  whole- 
some competition,  as  well  as  diminish  the  public  revenue,  it 
was  against  public  policy  and  void,  by  the  principles  of  the 
common  law. 

In  Hooker  v.  Vandewater,  4  Denio,  349,  the  proprietors  of 
five  several  lines  of  boats  engaged  in  the  business  of  transport- 
ing persons  and  freight  on  the  Erie  and  Oswego  canals  entered 
into  an  agreement  in  which,  "for  the  purpose  of  establishing 
and  maintaining  fair  and  uniform  rates  of  freight,  and  equaliz- 
ing the  business  among  themselves,  and  to  avoid  all  unnecessary 
expense  in  doing  the  same,"  they  agreed  to  run  for  the  residue 
of  the  season  of  navigation  at  certain  rates  of  freight  and 
passage  then  fixed  upon,  but  which  should  be  changed  whenever 
the  parties  should  deem  expedient,  and  to  divide  the  net  earn- 
ings among  themselves  according  to  certain  fixed  proportions ; 
and  it  was  held,  in  a  suit  on  the  agreement  against  a  party  who 
failed  to  make  payment  according  to  its  terms,  that  the  agree- 
ment was  a  conspiracy  to  commit  an  act  injurious  to  trade,  and 
was  illegal  and  void. 

In  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173, 
five  coal  companies  in  Pennsylvania  entered  into  an  agreement 
in  New  York  to  divide  two  coal  regions  of  which  they  had 
control;  to  appoint  a  committee  to  take  charge  of  their  in- 
terests, and  decide  all  questions ;  and  appoint  a  general  agent 
at  a  certain  point  in  the  state  of  New  York,  the  coal  mined  to 
be  delivered  through  him,  each  company  to  deliver  its  proper- 


470    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

tion  at  its  own  cost  at  the  different  markets,  at  such  time  and 
to  such  persons  as  the  committee  should  direct,  the  committee 
to  adjust  all  prices,  rates  of  freight,  etc.,  and  settlements  to  be 
made  between  the  several  companies  monthly ;  and  it  was  held, 
in  a  suit  brought  by  one  of  said  companies  against  another,  to 
enforce  a  liability  arising  under  said  contract,  that  the  contract 
w^as  in  violation  of  a  statute  of  New  York  making  it  a  mis- 
demeanor to  conspire  to  commit  any  act  injurious  to  trade  or 
commerce,  and  was  also  against  public  policy,  and  therefore 
illegal  and  void ;  the  court  laying  down  the  rule,  among  other 
things,  that  every  association  formed  to  raise  or  depress  prices 
beyond  what  they  would  be,  if  left  without  aid  or  stimulus, 
was  criminal. 

In  Craft  v.  McConoughy,  79  111.  346,  a  contract  was  entered 
into  by  all  the  grain  dealers  in  a  certain  town  which,  on  its 
face,  indicated  that  they  had  formed  a  partnership  for  the 
purpose  of  dealing  in  grain,  but  the  true  object  of  which  was 
to  form  a  secret  combination  which  would  stifle  all  competition, 
and  enable  the  parties,  by  secret  and  fraudulent  means,  to 
control  the  price  of  grain,  costs  of  storage,  and  expense  of 
shipment  at  such  town;  and  it  was  held,  on  bill  filed  for  an 
accounting  and  distribution  of  profits,  that  such  contract  was 
in  restraint  of  trade,  and  consequently  void  on  grounds  of 
public  policy.  In  discussing  the  principles  involved,  this  court 
said:  "While  these  parties  were  in  business  in  competition 
with  each  other,  they  had  the  undoubted  right  to  establish  their 
own  rates  for  grain  stored  and  commissions  for  shipment  and 
sale.  They  could  pay  as  high  or  low  a  price  for  grain,  as  they 
saw  proper,  and  as  they  could  make  contracts  for  with  the 
producer.  So  long  as  competition  was  free,  the  interest  of  the 
public  was  safe.  The  laws  of  trade,  in  connection  with  the 
rigor  of  competition,  were  all  the  guaranty  the  public  required ; 
but  the  secret  combination  created  by  the  contract  destroyed 
all  competition,  and  created  a  monopoly  against  which  the 
public  interest  had  no  protection." 

The  doctrine  of  the  foregoing  decisions  may,  in  our  opinion, 
be  fairly  applied  to  the  facts  in  the  present  case.  While  some 
of  the  cases  cited  involve  elements  not  present  here,  the  deter- 
mining circumstance  in  all  of  them  seems  to  have  been  a  com- 
bination or  conspiracy  among  a  number  of  persons  engaged  in 


THE  COMMON  LAW  471 

a  particular  business,  to  stifle  or  prevent  competition,  and 
thereby  to  enhance  or  diminish  prices  to  a  point  above  or  below 
what  they  would  have  been  if  left  to  the  influence  of  unre- 
stricted competition.  All  such  combinations  are  held  to  be 
contrary  to  public  policy,  and  the  courts,  therefore,  will  refuse 
to  lend  their  aid  to  the  enforcement  of  the  contracts  by  which 
such  combinations  are  sought  to  be  effected. 

Counsel  seek  to  distinguish  this  case  from  those  cited  by  the 
circumstance,  alleged  in  the  second  count  of  the  declaration, 
that  but  a  small  portion  of  the  law  stenographers  of  Chicago 
belong  to  said  association.  An  analogy  is  thereby  sought  to  be 
raised  between  the  contract  in  this  case  and  those  contracts  in 
partial  restraint  of  trade,  which  the  law  upholds.  We  think 
the  analogy  thus  sought  to  be  raised  does  not  exist.  Contracts 
in  partial  restraint  of  trade  which  the  law  sustains  are  those 
which  are  entered  into  by  a  vendor  of  a  business  and  its  good- 
will with  his  vendee,  by  which  the  vendor  agrees  not  to  engage 
in  the  same  business  within  a  limited  territory,  and  the  res- 
traint, to  be  valid,  must  be  no  more  extensive  than  is  reasonably 
necessary  for  the  protection  of  the  vendee  in  the  enjoyment 
of  the  business  purchased.  But  in  the  present  case  there  is  no 
purchase  or  sale  of  any  business,  nor  any  other  analogous  cir- 
cumstance giving  to  one  party  a  just  right  to  be  protected 
against  competition  from  the  other.  All  of  the  members  of  the 
association  are  engaged  in  the  same  business  within  the  same 
territory,  and  the  object  of  the  association  is  purely  and  simply 
to  silence  and  stifle  all  competition  as  between  its  members. 
No  equitable  reason  for  such  restraint  exists;  the  only  reason 
put  forward  being  that,  under  the  influence  of  competition  as 
it  existed  prior  to  the  organization  of  the  association,  prices  for 
stenographic  work  had  been  reduced  too  far,  and  the  associa- 
tion was  organized  for  the  purpose  of  putting  an  end  to  all 
competition,  at  least  as  between  those  who  could  be  induced  to 
become  members.  True,  the  restraint  is  not  so  far-reaching  as 
it  would  have  been  if  all  the  stenographers  in  the  city  had 
joined  the  association,  but,  so  far  as  it  goes,  it  is  of  precisely 
the  same  character,  produces  the  same  results,  and  is  subject 
to  the  same  legal  objection. 

It  may  also  be  observed  that,  by  the  constitution  of  the 
association,  any  reputable  stenographer,  regularly  engaged  in 


472    CO^MBINATIONS  AND  RESTRAINT  OF  TRADE 

law,  reporting  in  Cook  county,  is  eligible  to  membership,  and, 
if  all  or  a  major  part  of  the  stenographers  in  said  county  en- 
gaged in  that  business  are  not  already  members,  it  is  because 
the  association  has  not  yet  fully  accomplished  the  purposes  of 
its  organization.  "We  can  see  no  legal  difference  between  the 
restraint  upon  competition  which  it  now  exercises  and  that 
which  it  will  exercise  when  it  is  in  a  position  to  dictate  terms 
to  all  who  are  engaged  in  the  business,  and  to  all  who  may  wish 
to  obtain  the  services  of  law  stenographic  reporters. 

We  are  of  the  opinion  that  the  demurrer  to  the  declaration 
was  properly  sustained,  and  the  judgment  will  therefore  be 
affirmed.'^^ 


75 — See  also  Texas  Standard  Oil 
Co.  V.  Adoue,  83  Tex.  650  (combi- 
nation of  five  cotton  seed  oil  mills 
in  the  State  of  Texas — prices  fixed)  ; 
Nester  v.  Continental  Brewing  Co., 
161  Pa.  St.  473  (combinations  of 
brewers  of  Philadelphia — prices 
fixed)  ;  DeWitt  Wire-Cloth  Co.  v. 
New  Jersey  Wire-Cloth  Co.,  14  N.  Y. 
Supp.  277  (combination  of  wire- 
cloth  manufacturers — prices  fixed) ; 
Urmston  v.  Whitelegg  Bros.,  63  L. 
T.  N.  S.  455  (combination  of  min- 
eral water  producers — agreement  not 
to  sell  below  a  certain  price). 

But  in  Jones  v.  Pell,  Ex'r  of 
Clifford,  5  Fla.  510,  an  agreement  by 
three  pilots  that  each  should  be  on 
duty  one  day  and  off  duty  two  days, 
and  that  they  would  divide  the  prof- 
its equally,  was  held  valid. '  Baltzell, 
C.  J.,  said,  pp.  514-515:  "Associ- 
ations are  so  common  an  element, 
not  only  in  commerce,  but  in  all  the 
affairs  of  life,  that  it  would  be 
rather  perilous  on  the  part  of  the 
Court,  to  assert  that  they  impair 
competition,   destroy  emulation  and 


diminish  exertion.  There  is  scarcely 
an  occupation  in  life,  scarcely  a 
branch  of  trade,  from  the  very  larg- 
est to  the  smallest,  that  does  not 
feel  the  exciting  and  invigorating 
influence  of  this  wonderful  instru- 
mentality. It  made  and  conducts  our 
government,  constructs  our  railroads, 
our  steam  vessels,  our  magnificent 
ships,  our  temples  of  worship,  struc- 
tures for  public  and  private  use,  our 
manufactories,  creates  our  institu- 
tions for  learning,  builds  up  our 
cities  and   towns. 

"Its  very  office  is  to  do  what 
individual  exertion  may  not  accom- 
plish, and  in  a  degree  distinguishes 
civilized  from  savage  life.  Why 
then  should  this  important  agency 
be  denied  to  this  meritorious  class 
of  our  citizens?  They  are  in  general 
men  of  small  means,  to  whom  an 
association  may  not  only  be  desir- 
able, but  necessary  and  indispen- 
sable. Were  our  minds  less  clear  on 
the  subject,  we  are  not  permitted  to 
assert  the  invalidity  of  the  act  on 
this  account." 


THE  COMMON  LAW  473 

BOHN  MFG.  CO.  v.  HOLLIS 
(Supreme  Court  of  Minnesota,  1893.     54  Minn.  223.) 

Appeal  from  district  court,  Ramsey  county;  Cornish,  Judge. 

Action  by  the  Bohn  Manufacturing  Company  against  W.  G. 
HoUis  and  others  for  an  injunction.  From  an  order  denying 
a  motion  to  dissolve  the  temporary  writ  issued,  defendants  ap- 
peal.   Reversed. 

MITCHELL,  J.  The  pleadings  in  this  case,  and  the  affidavits 
read  on  the  motion  to  dissolve  the  temporary  injunction,  are  so 
voluminous,  and  so  abound  in  mere  inferences  as  to  motives  and 
consequences,  and  in  adjectives  and  other  qualifying  epithets, 
as  to  convey  the  impression,  at  first  sight,  that  the  facts  were 
both  complicated  and  controverted.  But  a  careful  analysis  of 
the  record  proves  that  there  is  no  real  dispute  as  to  the 
material  facts,  which  are  comparatively  simple.  Stripped  of 
all  extraneous  matter,  the  case  discloses  just  this  state  of,  facts: 
The  plaintifi"  is  a  manufacturer  and  vendor  of  lumber  and  other 
buildmg  material,  having  a  large  and  profitable  trade  at  whole- 
sale and  retail  in  this  and  adjoining  states,  a  large  and  valuable 
part  of  this  trade  being  with  the  retail  lumber  dealers.  The 
defendant,  the  Northwestern  Lumbermen's  Association,  is  a 
voluntary  association  of  retail  lumber  dealers,  comprising  from 
25  to  50  per  cent,  of  the  retail  dealers  doing  business  in  the 
states  referred  to,  many  of  whom  are,  or  have  been,  customers 
of  the  plaintiff.  A  "retailer,"  as  defined  in  the  constitution  of 
the  association,  is  "any  person  who  is  engaged  in  retailing 
lumber,  who  carries  at  all  times  a  stock  of  lumber  adequate  to 
the  wants  of  the  community,  and  who  regularly  maintains  an 
office  as  a  lumber  dealer,  and  keeps  the  same  open  at  proper 
times."  Any  wholesale  dealer  or  manufacturer  of  lumber  who 
conforms  to  the  rules  of  the  association  may  become  an  hon- 
orary member,  and  attend  its  meetings,  but  is  not  allowed  to 
vote.  The  object  of  the  association  is  stated  in  its  constitution 
to  be  "the  protection  of  its  members  against  sales  by  whole- 
sale dealers  and  manufacturers  to  contractors  and  consumers." 
The  object  is  more  fully  stated,  and  the  means  by  which  it  is  to 
be  carried  into  effect  are  fully  set  out,  in  sections  3,  3V2>  4,  and 
6  of  the  by-laws,  which  are  all  that  we  consider  material  in  this 


474    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

case.  The  plaintiff  sold  two  bills  of  lumber  directly  to  con- 
sumers or  contractors  at  points  where  members  of  the  associa- 
tion were  engaged  in  business  as  retail  dealers.  Defendant 
Ilollis,  the  secretary  of  the  association,  having  been  informed 
of  this  fact,  notified  plaintiff,  in  pursuance  of  section  3  of  the 
by-laws,  that  he  had  a  claim  against  it  for  10  per  cent,  of  the 
amount  of  these  sales.  Considerable  correspondence  with  ref- 
erence to  the  matter  ensued,  in  which  the  plaintiff,  from  time  to 
time,  promised  to  adjust  the  matter,  but  procrastinated  and 
evaded  doing  so  for  so  long  that  finally  Hollis  threatened  that 
unless  plaintiff  immediately  settled  the  matter  he  would  send 
to  all  the  members  of  the  association  the  lists  or  notices  pro- 
vided for  by  section  6  of  the  by-laws,  notifying  them  that  plain- 
tiff refused  to  comply  with  the  rules  of  the  association,  and  was 
no  longer  in  sympathy  with  it.  Thereupon,  plaintiff  commenced 
this  action  for  a  permanent  injunction,  and  obtained,  ex  parte, 
a  temporary  one,  enjoining  the  defendants  from  issuing  these 
notices,  etc.  This  appeal  is  from  an  order  refusing  to  dissolve 
the  temporary  injunction.  It  is  alleged,  and  in  view  of  the  facts 
must  be  presumed  to  be  true,  that  if  these  notices  should  be 
issued  the  members  of  the  association  would  thereafter  refuse 
to  deal  with  the  plaintiff,  thereby  resulting  in  loss  to  it  of 
gains  and  profits. 

The  case  presents  one  phase  of  a  subject  which  is  likely  to 
be  one  of  the  most  important  and  difficult  which  will  confront 
the  courts  during  the  next  quarter  of  a  century.  This  is  the 
age  of  associations  and  unions,  in  all  departments  of  labor  and 
business,  for  purposes  of  mutual  benefit  and  protection.  Conr 
fined  to  proper  limits,  both  as  to  end  and  means,  they  are  not 
only  lawful,  but  laudable.  Carried  beyond  those  limits,  they 
are  liable  to  become  dangerous  agencies  for  wrong  and  oppres- 
s-ion.  Beyond  what  limits  these  associations  or  combinations 
cannot  go,  without  interfering  with  the  legal  rights  of  others, 
is  the  problem  which,  in  various  phases,  the  courts  will  doubt- 
less be  frequently  called  to  pass  upon.  There  is,  perhaps,  dan- 
ger that,  influenced  by  such  terms  of  illusive  meaning  as  "mon- 
opolies," "trusts,"  "boycotts,"  "strikes,"  and  the  like,  they 
may  be  led  to  transcend  the  limits  of  their  jurisdiction,  and,  like 
the  court  of  king's  bench  in  Bagg's  Case,  11  Coke,  98a,  assume 
that,  on  general  principles,  they  have  authority  to  correct  or 


THE  COMMON  LAW  475 

reform  everything  which  they  may  deem  wrong,  or,  as  Lord 
Ellsmere  puts  it,  ''to  manage  the  state."  But  whatever  doubts 
or  difficulties  may  arise  in  other  cases,  presenting  other  phases 
of  the  general  subject  involved  here,  it  seems  to  us  that  there 
can  be  none  on  the  facts  of  the  present  case.  Both  the  affidavits 
and  brief  in  behalf  of  the  plaintiff  indulge  in  a  great  deal  of 
strong,  and  even  exaggerated,  assertion,  and  in  many  words 
and  expressions  of  very  indefinite  ajid  illusive  meaning,  such 
as  "wreck,"  "coerce/'  "extort^"  "conspiracy,"  "monopoly," 
"drive  out  of  business,"  and  the  like.  This  looks  very  formid- 
able, but  in  law,  as  well  as  in  mathematics,  it  simplifies  things 
very  much  to  reduce  them  to  their  lowest  terms.  It  is  con- 
ceded that  retail  lumber  yards  in  the  various  cities,  towns,  and 
villages  are  not  only  a  public  convenience,  but  a  public  neces- 
sity; also,  that,  to  enable  the  owners  to  maintain  these  yards, 
they  must  sell  their  lumber  at  a  reasonable  profit.  It  also  goes 
without  saying  that  to  have  manufacturers  or  wholesale  dealers 
sell  at  retail,  directly  to  consumers,  in  the  territory  upon  which 
the  retail  dealer  depends  for  his  customers,  injuriously  affects 
and  demoralizes  his  trade.  This  is  so  well  recognized  as  a  rule 
of  trade,  in  every  department,  that  generally  wholesale  dealers 
refrain  from  selling  at  retail  within  the  territory  from  which 
their  customers  obtain  their  trade.  Now,  when  reduced  to  its 
ultimate  analysis,  all  that  the  retail  lumber  dealers,  in  this  case, 
have  done,  is  to  form  an  association  to  protect  themselves  from 
sales  by  wholesale  dealers  or  manufacturers,  directly  to  con- 
sumers or  other  nondealers,  at  points  where  a  member  of  the 
association  is  engaged  in  the  retail  business.  The  means  adopted 
to  effect  this  object  are  simply  these :  They  agree  among 
themselves  that  they  will  not  deal  with  any  wholesale  dealer 
or  manufacturer  who  sells  directly  to  customers,  not  dealers,  at 
a  point  where  a  member  of  the  association  is  doing  business, 
and  provide  for  notice  being  given  to  all  their  members  when- 
ever a  wholesale  dealer  or  manufacturer  makes  any  such  sale. 
That  is  the  head  and  front  of  defendants'  offense.  It  will  be 
observed  that  defendants  were  not  proposing  to  send  notices  to 
any  one  but  members  of  the  association.  There  was  no  element 
of  fraud,  coercion,  or  intimidation,  either  towards  plaintiff  or 
the  members  of  the  association.  True,  the  secretary,  in  accord- 
ance with  section  3  of  the  by-laws,  made  a  demand  on  plaintiff 


476    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

for  10  per  cent,  on  the  amount  of  the  two  sales.  But  this  in- 
volved no  element  of  coercion  or  intimidation,  in  the  legal 
sense  of  those  terms.  It  was  entirely  optional  with  plaintiff 
whether  it  would  pay  or  not.  If  it  valued  the  trade  of  the 
members  of  the  association  higher  than  that  of  nondealers  at 
the  same  points,  it  would  probably  conclude  to  pay ;  otherwise, 
not.  It  cannot  be  claimed  that  the  act  of  making  this  demand 
was  actionable;  much  less,  that  it  constituted  any  ground  for 
an  injunction;  and  hence  this  matter  may  be  laid  entirely  out 
of  view.  Nor  was  any  coercion  proposed  to  be  brought  to  bear 
on  the  members  of  the  association,  to  prevent  them  from  trading 
with  the  plaintiff.  After  they  received  the  notices,  they  would 
be  at  entire  liberty  to  trade  with  plaintiff,  or  not,  as  they  saw 
fit.  By  the  provisions  of  the  by-laws,  if  they  traded  with  the 
plaintiff,  they  were  liable  to  be  "expelled;"  but  this  simply 
meant  to  cease  to  be  members.  It  was  wholly  a  matter  of  their 
own  free  choice,  which  they  preferred, — to  trade  with  the  plain- 
tiff, or  to  continue  members  of  the  association.  So  much  for 
the  facts,  and  all  that  remains  is  to  apply  to  them  a  few  well- 
settled,  elementary  principles  of  law: 

1.  The  mere  fact  that  the  proposed  acts  of  the  defendants 
would  have  resulted  in  plaintiff 's  loss  of  gains  and  profits  does 
not,  of  itself,  render  those  acts  unlawful  or  actionable.  That 
depends  on  whether  the  acts  are,  in  and  of  themselves,  unlaw- 
ful. "Injury,"  in  its  legal  sense,  means  damage  resulting  from 
an  unlawful  act.  Associations  may  be  entered  into,  the  object 
of  which  is  to  adopt  measures  that  may  tend  to  diminish  the 
gains  and  profits  of  another,  and  yet,  so  far  from  being  un- 
lawful, they  may  be  highly  meritorious.  Com.  v.  Hunt,  4  Mete. 
(Mass.)  Ill;  Steamship  Co.  v.  McGregor,  21  Q.  B.  Div.  544. 

2.  If  an  act  be  lawful, — one  that  the  party  has  a  legal  right 
to  do, — the  fact  that  he  may  be  actuated  by  an  improper  motive 
does  not  render  it  unlawful.  As  said  in  one  case,  "the  exercise 
by  one  man  of  a  legal  right  cannot  be  a  legal  wrong  to  an- 
other," or,  as  expressed  in  another  case,  "malicious  motives 
make  a  bad  case  worse,  but  they  cannot  make  that  wrong  which, 
in  its  own  essence,  is  lawful. ' '  Hey  wood  v.  Tillson,  75  Me.  225 ; 
Phelps  V.  Nowlen,  72  N.  Y.  39 ;  Jenkins  v.  Fowler,  24  Pa.  St. 
308. 

3.  To  enable  the  plaintiff  to  maintain  this  action,  it  must 


THE  COMMON  LAW  477 

appear  that  defendants  have  committed,  or  are  about  to  com- 
mit, some  unlawful  act,  which  will  interfere  with,  and  in- 
juriously affect,  some  of  its  legal  rights.  We  advert  to  this  for 
the  reason  that  counsel  for  plaintiff  devotes  much  space  to 
assailing  this  association  as  one  whose  object  is  unlawful  be- 
cause in  restraint  of  trade.  We  fail  to  see  wherein  it  is  subject 
to  this  charge;  but,  even  if  it  were,  this  would  not,  of  itself, 
give  plaintiff  a  cause  of  action.  No  case  can  be  found  in  which 
it  was  ever  held  that,  at  common  law,  a  contract  or  agreement 
in  general  restraint  of  trade  was  actionable  at  the  instance  of 
third  parties,  or  could  constitute  the  foundation  for  such  an 
action.  The  courts  sometimes  call  such  contracts  "unlawful" 
or  "illegal,"  but  in  every  instance  it  will  be  found  that  these 
terms  were  used  in  the  sense,  merely,  of  "void"  or  "unenforce- 
able" as  between  the  parties;  the  law  considering  the  disad- 
vantage so  imposed  upon  the  contract  a  sufficient  protection  to 
the  public.  Steamship  Co.  v.  McGregor,  23  Q.  B.  Div.  598, 
[1892]  App.  Cas.  25. 

4.  What  one  man  may  lawfully  do  singly,  two  or  more  may 
lawfully  agree  to  do  jointly.  The  number  who  unite  to  do  the 
act  cannot  change  its  character  from  lawful  to  unlawful.  The 
gist  of  a  private  action  for  the  wrongful-  act^  of  many  is  not 
the  combination  or  conspiracy,  but  the  damage  done  or  threat- 
ened to  the  plaintiff  by  the  acts  of  the  defendants.  If  the  act 
be  unlawful,  the  combination  of  many  to  commit  it  may  aggra- 
vate the  injury,  but  cannot  change  the  character  of  the  act. 
In  a  few  cases  there  may  be  some  loose  remarks  apparently  to 
the  contrary,  but  they  evidently  have  their  origin  in  a  con- 
fused and  inaccurate  idea  of  the  law  of  criminal  conspiracy, 
and  in  failing  to  distinguish  between  an  unlawful  act  and  a 
criminal  act.  It  can  never  be  a  crime  to  combine  to  commit,  a 
lawful  act,  but  it  may  be  a  crime  for  several  to  conspire  to  com- 
mit an  unlawful  act,  which,  if  done  by  one  individual  alone, 
although  unlawful,  would  not  be  criminal.  Hence,  the  fact 
that  the  defendants  associated  themselves  together  to  do  the 
act  complained  of  is  wholly  immaterial  in  this  case.  We  have 
referred  to  this  for  the  reason  that  counsel  has  laid  great  stress 
upon  the  fact  of  the  combination  of  a  large  number  of  persons, 
as  if  that,  of  itself,  rendered  their  conduct  actionable.  Bowen 
V.  Matheson,  14  Allen,  499;  Steamship  Co.  v.  McGregor,  23 


478    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Q.  B.  Div.  598,  [1892]  App.  Cas.  25;  Parker  v.  Huntington,  2 
Gray,  124 ;  Wellington  v.  Small,  3  Gush.  145 ;  Payne  v.  Railway 
Co.,  13  Lea,  507. 

5.  With  these  propositions  in  mind,  which  bring  the  case 
down  to  a  very  small  compass,  we  come  to  another  proposition, 
which  is  entirely  decisive  of  the  case.  It  is  perfectly  lawful 
for  any  man  (unless  under  contract  obligation,  or  unless  his 
employment  charges  him  with  some  public  duty)  to  refuse  to 
work  for  or  to  deal  with  any  man  or  class  of  men,  as  he  sees 
fit.  This  doctrine  is  founded  upon  the  fundamental  right  of 
every  man  to  conduct  his  own  business  in  his  own  way,  subject 
only  to  the  condition  that  he  does  not  interfere  with  the  legal 
rights  of  others.  And,  as  has  been  already  said,  the  right 
which  one  man  may  exercise  singly,  many,  after  consultation, 
may  agree  to  exercise  jointly,  and  make  simultaneous  declara- 
tion of  their  choice.  This  has  been  repeatedly  held  as  to  asso- 
ciations or  unions  of  workmen,  and  associations  of  men  in 
other  occupations  or  lines  of  business  must  be  governed  by  the 
same  principles.  Summed  up,  and  stripped  of  all  extraneous 
matter,  this  is  all  that  defendants  have  done,  or  threatened  to 
do,  and  we  fail  to  see  anything  unlawful  or  actionable  in  it. 
Com.  V.  Hunt,  supra;  Carew  v.  Rutherford,  106  Mass.  1 ;  Steam- 
ship Co.  v.  McGregor,  [1892]  App.  Cas.  25. 

Order  reversed,  and  injunction  dissolved. 

Vanderburgh,  J.,  absent,  took  no  part. 


MARTELL  v.  WHITE 


(Supreme   Judicial    Court   of   Massachusetts,    1904. 
185  Mass.  255.) 

Exceptions  from  Superior  Court,  Norfolk  County;  Robt.  R. 
Bishop,  Judge. 

Action  of  tort  by  one  Martell  against  one  White  and  others 
for  conspiracy  to  injure  plaintiff's  business.  Verdict  was 
ordered  for  defendants,  and  plaintiff  excepted.  Exceptions 
sustained. 


THE  COMMON  LAW  479 

HAMMOND,  J.  The  evidence  warranted  the  finding  of  the 
following  facts,  many  of  which  were  not  in  dispute :  The 
plaintiff  was  engaged  in  a  profitable  business  in  quarrying 
granite  and  selling  the  same  to  granite  workers  in  Quincy  and 
vicinity.  About  January,  1899,  his  customers  left  him,  and  his 
business  was  ruined,  through  the  action  of  the  defendants  and 
their  associates. 

The  defendants  were  all  members  of  a  voluntary  association 
known  as  the  Granite  Manufacturers'  Association  of  Quincy, 
Mass.,  and  some  of  them  were  on  the  executive  committee.  The 
association  was  composed  of  "such  individuals,  firms,  or  cor- 
porations as  are,  or  are  about  to  become  manufacturers,  quar- 
riers,  or  polishers  of  granite."  There  was  no  constitution,  and, 
while  there  were  by-laws,  still,  except  as  hereinafter  stated, 
there  was  in  them  no  statement  of  the  objects  for  whicli  the 
association  was  formed.  The  by-laws  provided,  among  other 
things,  for  the  admission,  suspension,  and  expulsion  of  mem- 
bers, the  election  of  officers,  including  an  executive  committee, 
and  defined  the  respective  powers  and  duties  of  the  officers. 
One  of  the  by-laws  read  as  follows:  "For  the  purpose  of  de- 
fraying in  part  the  expense  of  the  maintenance  of  this  organi- 
zation, any  member  thereof  having  business  transactions  with 
any  party  or  concern  in  Quincy  or  its  vicinity,  not  members 
hereof,  and  in  any  way  relating  to  the  cutting,  quarrying,  pol- 
ishing, buying  or  selling  of  granite  (hand  polishers  excepted) 
shall  for  each  of  said  transactions  contribute  at  least  $1  and  not 
more  than  $500.  The  amount  to  be  fixed  by  the  association 
upon  its  determining  the  amount  and  nature  of  said  transac- 
tion." 

Acting  under  the  by-laws,  the  association  investigated  charges 
which  were  made  against  several  of  its  members  that  they  had 
purchased  granite  from  a  party  "not  a  member"  of  the  asso- 
ciation. The  charges  were  proved,  and,  under  the  section 
above  quoted,  it  was  voted  that  the  offending  parties  "should 
respectively  contribute  to  the  funds  of  the  association"  the 
sums  named  in  the  votes.  These  sums  ranged  from  $10  to 
$100.  Only  the  contribution  of  $100  has  been  paid,  but  it  is  a 
fair  inference  that  the  proceedings  to  coUect  the  others  have 
been  delayed  only  by  reason  of  this  suit.  The  party  "not  a 
member"  was  the  present  plaintiff,  and  the  members  of  the 


480    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

association  knew  it.  Most  of  the  customers  of  tho  plaintiff 
were  members  of  the  association,  and  after  these  proceedings 
they  declined  to  deal  with  him.  This  action  on  their  part  was 
due  to  the  course  of  the  association  in  compelling  them  to  con- 
tribute as  above  stated,  and  to  their  fear  that  a  similar  vote 
for  contribution  would  be  passed,  should  they  continue  to  trade 
with  the  plaintiff. 

The  jury  might  properly  have  found,  also,  that  the  euphemis- 
tic expression,  "shall  contribute  to  the  funds  of  the  associa- 
tion," contained  an  idea  which  could  be  more  tersely  and 
accurately  expressed  by  the  phrase  "shall  pay  a  fine,"  or,  in 
other  words,  that  the  plain  intent  of  the  section  was  to  provide 
for  the  imposition  upon  those  who  came  within  its  provisions 
of  a  penalty  in  the  nature  of  a  substantial  fine.  The  bill  of 
exceptions  recites  that  "there  was  no  evidence  of  threats  or 
intimidation  practiced  upon  the  plaintiff  himself,  and^  the  acts 
complained  of  were  confined  to  the  action  of  the  society  upon 
its  own  members."  We  understand  this  statement  to  mean 
simply  that  the  acts  of  the  association  concerned  only  such  of 
the  plaintiff's  customers  as  were  members,  and  that  no  pressure 
w^as  brought  to  bear  upon  the  plaintiff,  except  such  as  fairly 
resulted  from  action  upon  his  customers.  While  it  is  true  that 
the  by-law  was  not  directed  expressly  against  the  plaintiff  by 
name,  still  he  belonged  to  the  class  whose  business  it  was  in- 
tended to  affect,  and  the  proceedings  actually  taken  were  based 
upon  transactions  with  him  alone,  and  in  that  way,  were  di- 
rected against  his  business  alone.  It  was  the  intention  of  the 
defendants  to  withdraw  his  customers  from  him,  if  possible,  by 
the  imposition  of  fines  upon  them,  with  the  knowledge  that 
the  result  would  be  a  great  loss  to  the  plaintiff.  The  defendants 
must  be  presumed  to  have  intended  the  natural  result  of  their 
acts. 

Here,  then,  is  a  clear  and  deliberate  interference  with  the 
business  of  a  person,  with  the  intention  of  causing  damage  to 
him,  and  ending  in  that  result.  The  defendants  combined  and 
conspired  together  to  ruin  the  plaintiff  in  his  business,  and 
they  accomplished  their  purpose.  In  all  this,  have  they  kept 
within  lawful  bounds? 

It  is  elemental  that  the  unlawfulness  of  a  conspiracy  may  be 
found  either  in  the  end  sought,  or  the  means  to  be  used.     If 


THE  COMMON  LAW  481 

either  is  unlawful,  within  the  meaning  of  the  term  as  applied 
to  the  subject,  then  the  conspiracy  is  unlawful.  It  becomes 
necessary,  therefore,  to  examine  into  the  nature  of  the  con- 
spiracy in  this  case,  both  as  to  the  object  sought  and  the  means 
used. 

The  case  presents  one  phase  of  a  general  subject,  which 
gravely  concerns  the  interests  of  the  business  world,  and,  in- 
deed, those  of  all  organized  society,  and  which  in  recent  years 
has  demanded  and  received  great  consideration  in  the  courts 
and  elsewhere.  Much  remains  to  be  done  to  clear  the  atmos- 
phere, but  some  things,  at  least,  appear  to  have  been  settled; 
and  certainly  at  this  stage  of  the  judicial  inquiry  it  cannot  be 
necessary  to  enter  upon  a  course  of  reasoning  or  to  cite  authori- 
ties in  support  of  the  proposition  that,  while  a  person  must 
submit  to  competition,  he  has  the  right  to  be  protected  from 
malicious  interference  with  his  business.  The  rule  is  well 
stated  in  Walker  v.  Cronin,  107  Mass.  555,  564,  in  the  following 
language:  "Every  one  has  a  right  to  enjoy  the  fruits  and 
advantages  of  his  own  enterprise,  industry,  skill,  and  credit. 
He  has  no  right  to  be  protected  against  competition,  but  he  has 
a  right  to  be  free  from  malicious  and  wanton  interference, 
disturbance,  or  annoyance.  If  disturbance  or  loss  come  as  a 
result  of  competition,  or  the  exercise  of  like  rights  by  others, 
it  is  damnum  absque  injuria,  unless  some  superior  right  by 
contract  or  otherwise  is  interfered  with.  But  if  it  come  from 
the  merely  wanton  or  malicious  acts  of  others,  without  the 
justification  of  competition  or  the  service  of  any  interest  or 
lawful  purpose,  it  then  stands  upon  a  different  footing." 

In  a  case  like  this,  where  the  injury  is  intentionally  inflicted, 
the  crucial  question  is  whether  there  is  justifiable  cause  for  the 
act.  If  the  injury  be  inflicted  without  just  cause  or  excuse, 
then  it  is  actionable.  Bowen,  L.  J.,  in  Mogul  Steamship  Co. 
V.  McGregor,  23  Q.  B.  D.  598,  613 ;  Plant  v.  Woods,  176  Mass. 
492,  51  L.  R.  A.  339,  79  Am.  St.  Rep.  330.  The  justification 
must  be  as  broad  as.  the  act,  and  must  cover  not  only  the 
motive  and  the  purpose,  or,  in  other  words,  the  object  sought, 
but  also  the  means  used. 

The  defendants  contend  that,  both  as  to  object  and  means, 
they  are  justified  by  the  law  applicable  to  business  competition. 
In  considering  this  defense,  it  is  to  be  remembered,  as  was  said 

KaJes  B.  of  T.  Vol.  1—31 


482    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

by  BowEN,  L.  J.,  in  Mogul  Steamship  Co.  v.  McGregor,  L.  R. 
23  Q.  B.  D.  598,  611,  that  there  is  presented  "an  apparent  con- 
flict or  antinomy  between  two  rights  that  are  equally  regarded 
by  the  law— the  right  of  the  plaintiff  to  be  protected  in  the 
legitimate  exercise  of  his  trade,  and  the  right  of  the  defend- 
ants to  carry  on  their  business  as  seems  best  to  them,  provided 
they  commit  no  wrong  to  others."  Here,  as  in  most  cases 
where  there  is  a  conflict  between  two  important  principles, 
either  of  which  is  sound,  and  to  be  sustained  within  proper 
bounds,  but  each  of  which  must  finally  yield,  to  some  extent,  to 
the  other,  it  frequently  is  not  possible  by  a  general  formula  to 
mark  out  the  dividing  line  with  reference  to  every  conceivable 
case,  and  it  is  not  wise  to  attempt  it.  The  best  and  only  prac- 
ticable course  is  to  consider  the  cases  as  they  arise,  and,  bear- 
ing in  mind  the  grounds  upon  which  the  soundness  of  each 
principle  is  supposed  to  rest,  by  a  process  of  elimination  and 
comparison  to  establish  points  through  which,  at  least,  the  line 
must  run,  and  beyond  which  the  party  charged  with  trespass 
shall  not  be  allowed  to  go. 

While  the  purpose  to  injure  the  plaintiff  appears  clearly 
enough,  the  object  or  motive  is  left  somewhat  obscure,  upon 
the  evidence.  The  association  has  no  written  constitution,  and 
the  by-laws  do  not  expressly  set  forth  its  objects.  It  is  true  that 
from  the  by-laws  it  appears  that  none  but  persons  engaged  in 
the  granite  business  can  be  members,  and  that  a  member  tran- 
sacting any  business  of  this  kind  with  a  person  not  a  member 
is  liable  to  a  fine,  from  which  it  may  be  inferred  that  it  is  the 
idea  of  the  members  that,  for  the  protection  of  their  business, 
it  would  be  well  to  confine  it  to  transactions  among  them- 
selves, and  that  one,  at  least,  of  the  objects  of  the  association 
is  to  advance  the  interests  of  the  members  in  that  way.  The 
oral  testimony  tends  to  show  that  one  object  of  the  association 
is  to  see  that  agreements  made  between  its  members  and  their 
employes,  and  between  this  association  and  similar  associations 
in  the  same  line  of  business,  be  kept  and  "lived  up  to." 
Whether  this  failure  to  set  out  fully  in  writing  the  objects,  is 
due  to  any  reluctance  to  have  them  clearly  appear,  or  to  some 
other  cause,  is,  of  course,  not  material  to  this  case.  The  result, 
however,  is  that  its  objects  do  not  so  clearly  appear  as  might 
])e  desired;  but,  in  view  of  the  conclusion  to  which  we  have 


THE  COMMON  LAW  483 

come  as  to  the  means  used,  it  is  not  necessary  to  inquire  more 
closely  as  to  the  objects.  It  may  be  assumed  that  one  of  the 
objects  was  to  enable  the  members  to  compete  more  success- 
fully with  others  in  the  same  business,  and  that  the  acts  of 
which  the  plaintiff  complains  were  done  for  the  ultimate  pro- 
tection and  advancement  of  their  own  business  interests,  with 
no  intention  or  desire  to  injure  the  plaintiff,  except  so  far  as 
such  injury  was  the  necessary  result  of  measures  taken  for 
their  own  interests.  If  that  was  true,  then,  so  far  as  respects 
the  end  sought,  the  conspiracy  does  not  seem  to  have  been 
illegal. 

The  next  question  is  whether  there  is  anything  unlawful  or 
wrongful  in  the  means  used,  as  applied  to  the  acts  in  question. 
Nothing  need  be  said  in  support  of  the  general  right  to  com- 
pete. To  what  extent  combination  may  be  allowed  in  competi- 
tion is  a  matter  about  which  there  is  as  yet  much  conflict,  but 
it  is  possible  that,  in  a  more  advanced  stage  of  the  discussion, 
the  day  may  come  when  it  will  be  more  clearly  seen,  and  will 
more  distinctly  appear  in  the  adjudication  of  the  courts,  than 
as  yet  has  been  the  case,  that  the  proposition  that,  what  one 
man  lawfully  can  do,  any  number  of  men,  acting  together  by 
combined  agreement,  lawfully  may  do,  is  to  be  received  with 
newly  disclosed  qualifications,  arising  out  of  the  changed  con- 
ditions of  civilized  life  and  of  the  increased  facility  and  power 
of  organized  combination,  and  that  the  difference  between  the 
power  of  individuals,  acting  each  according  to  his  own  pref- 
erence, and  that  of  an  organized  and  extensive  combination, 
may  be  so  great  in  its  effect  upon  public  and  private  interests 
as  to  cease  to  be  simply  one  of  degree,  and  to  reach  the  dignity 
of  a  difference  in  kind.  Indeed,  in  the  language  of  Bowen, 
L.  J.,  in  the  Mogul  Steamship  Case,  nhi  supra  (page  616)  : 
"Of  the  general  proposition  that  certain  kinds  of  conduct  not 
criminal  in  one  individual  may  become  criminal  if  done  by 
combination  among  several,  there  can  be  no  doubt.  The  dis- 
tinction is  based  on  sound  reason,  for  a  combination  may  make 
oppressive  or  dangerous  that  which,  if  it  proceeded  only  from 
a  single  person,  would  be  otherwise;  and  the  very  fact  of  the 
combination  may  show  that  the  object  is  simply  to  do  harm, 
and  not  to  exercise  one's  own  just  rights."  See,  also,  opinion 
of  Stirling,  L.  J.,  in  Giblan  v.  National  Amalgamated  Labour- 


484    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ers'  Union  [1903]  2  K.  B.  600,  621.  Speaking  generally,  how- 
ever, competition  in  business  is  permitted,  although  frequently- 
disastrous  to  those  engaged  in  it.  It  is  always  selfish,  often 
sharp,  and  sometimes  deadly.  Conspicuous  illustrations  of  the 
destructive  extent  to  which  it  may  be  carried  are  to  be  found 
in  the  Mogul  Steamship  Case,  above  cited,  and  in  Bowen  v, 
Matheson,  14  Allen,  499.  The  fact,  therefore,  that  the  plaintiff 
was  vanquished,  is  not  enough,  provided  that  the  contest  was 
carried  on  within  the  rules  allowable  in  such  warfare. 

It  is  a  right,  however,  which  is  to  be  exercised  with  reference 
to  the  existence  of  a  similar  right  on  the  part  of  others.  The 
trader  has  not  a  free  lance.  He  may  fight,  but  as  a  soldier,  not 
as  a  guerilla.  The  right  of  competition  rests  upon  the  doctrine 
that  the  interests  of  the  great  public  are  best  subserved  by 
permitting  the  general  and  natural  laws  of  business  to  have 
their  full  and  free  operation,  and  that  this  end  is  best  attained 
when  the  trader  is  allowed,  in  his  business,  to  make  free  use 
of  these  laws.  He  may  praise  his  wares,  may  offer  more  ad- 
vantageous terms  than  his  rival,  may  sell  at  less  than  cost,  or 
in  the  words  of  Bowen,  L.  J.,  in  the  Mogul  Steamship  Case, 
uhi  supra,  may  adopt  "the  expedient  of  sowing  one  year  a  crop 
of  apparently  unfruitful  prices,  in  order,  by  driving  competi- 
tion away,  to  realize  a  fuller  harvest  of  profit  in  the  future." 
In  these  and  many  other  obvious  ways  he  may  secure  the  cus- 
tomers of  his  rival,  and  build  up  his  own  business  to  the  de- 
struction of  that  of  others ;  and,  so  long  as  he  keeps  within  the 
operation  of  the  laws  of  trade,  his  justification  is  complete. 

But  from  the  very  nature  of  the  case,  it  is  manifest  that  the 
right  of  competition  furnishes  no  justification  for  an  act  done 
by  the  use  of  means  which  in  their  nature  are  in  violation  of  the 
principle  upon  which  it  rests.  The  weapons  used  by  the  trader 
who  relies  upon  this  right  for  justification  must  be  those  fur- 
nished by  the  laws  of  trade,  or  at  least  must  not  be  inconsistent 
with  their  free  operation.  No  man  can  justify  an  interference 
with  another  man's  business  through  fraud  or  misrepresenta- 
tion, nor  by  intimidation,  obstruction,  or  molestation.  In  the 
case  before  us  the  members  of  the  association  were  to  be  held 
to  the  policy  of  refusing  to  trade  with  the  plaintiff  by  the 
imposition  of  heavy  fines,  or,  in  other  words,  they  were  coerced 
by  actual  or  threatened  injury  to  their  property.    It  is  true 


THE  COMMON  LAW  485 

that  one  may  leave  the  association  if  he  desires,  but,  if  he  stays 
in  it,  he  is  subjected  to  the  coercive  effect  of  a  fine,  to  be  de- 
termined and  enforced  by  the  majority.  This  method  of  pro- 
cedure is  arbitrary  and  artificial,  and  is  based  in  no  respect 
upon  the  grounds  upon  which  competition  in  business  is  per- 
mitted, but,  on  the  contrary,  it  creates  a  motive  for  business 
action  inconsistent  with  that  freedom  of  choice  out  of  which 
springs  the  benefit  of  competition  to  the  public,  and  has  no 
natural  or  logical  relation  to  the  grounds  upon  which  the  right 
to  compete  is  based.  Such  a  method  of  influencing  a  person 
may  be  coercive  and  illegal.  Carew  v.  Rutherford,  106  Mass. 
1,  8  Am.  Rep.  287. 

Nor  is  the  nature  of  the  coercion  changed  by  the  fact  that 
the  persons  fined  were  members  of  the  association.  The  words 
of  MuNSON,  J.,  in  Boutwell  v.  Marr,  71  Vt.  1,  9,  609,  43  L.  R. 
A.  803,  76  Am.  St.  Rep.  746,  are  applicable  here:  "The  law 
cannot  be  compelled,  by  any  initial  agreement  of  an  associate 
member,  to  treat  him  as  one  having  no  choice  but  that  of  the 
majority,  nor  as  a  willing  participant  in  whatever  action  may 
be  taken.  The  voluntary  acceptance  of  by-laws  providing  for 
the  imposition  of  coercive  fines  does  not  make  them  legal  and 
collectible,  and  the  standing  threat  of  their  imposition  may 
properly  be  classed  with  the  ordinary  threat  of  suits  upon 
groundless  claims.  The  fact  that  the  relations  and  processes 
deemed  essential  to  a  recovery  are  brought  within  the  mem- 
bership and  proceedings  of  an  organized  body  cannot  change 
the  result.  The  law  sees  in  the  membership  of  an  association 
of  this  character  both  the  authors  of  its  coercive  system  and 
the  victim  of  its  unlawful  pressure.  If  this  were  not  so,  men 
could  deprive  their  fellows  of  established  rights,  and  evade 
the  duty  of  compensation,  simply  by  working  through  an 
association." 

In  view  of  the  considerations  upon  which  the  right  of  com- 
petition is  based,  we  are  of  opinion  that,  as  against  the  plain- 
tiff, the  defendants  have  failed  to  show  that  the  coercion  or 
intimidation  of  the  plaintiff's  customers  by  means  of  a  fine  is 
justified  by  the  law  of  competition.  The  ground  of  the  justi- 
fication is  not  broad  enough  to  cover  the  acts  of  interference 
in  their  entirety,  and  the  interference,  being  injurious  and  un- 
justifiable, is  unlawful. 


486    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

We  do  not  mean  to  be  understood  as  saying  that  a  fine  is  of 
itself  necessarily,  or  even  generally,  an  illegal  implement.  In 
many  cases  it  is  so  slight  as  not  to  be  coercive  in  its  nature; 
in  many,  it  serves  a  useful  purpose  to  call  the  attention  of  a 
member  of  an  organization  to  the  fact  of  the  infraction  of 
some  innocent  regulation;  and,  in  many,  it  serves  as  an  extra 
incentive  to  the  performance  of  some  absolute  duty  or  the 
assertion  of  some  absolute  right.  But  where,  as  in  the  case 
before  us,  the  fine  is  so  large  as  to  amount  to  moral  intimida- 
tion or  coercion,  and  is  used  as  a  means  to  enforce  a  right  not 
absolute  in  its  nature,  but  conditional,  and  is  inconsistent  with 
those  conditions  upon  which  the  right  rests,  then  the  coercion 
becomes  unjustifiable,  and  taints  with  illegality  the  act. 

The  defendants  strongly  rely  upon  Bowen  v.  Matheson,  14 
Allen  499;  Mogul  Steamship  Co.  v.  McGregor  [1892]  A.  C.  25; 
Bohn  Mfg.  Co.  v.  Hollis,  54  Minn.  223,  21  L.  R.  A.  337,  40  Am. 
St.  Rep.  319 ;  Macauley  Bros.  v.  Tierney,  19  R.  I.  255,  37  L.  R. 
A.  455,  61  Am.  St.  Rep.  770 ;  and  Cote  v.  Murphy,  159  Pa.  420, 
23  L.  R.  A.  135,  39  Am.  St.  Rep.  686.  In  none  of  these  cases 
was  there  any  coercion  by  means  of  fines  upon  those  who  traded 
with  the  plaintiff.  Inducements  were  held  out,  but  they  were 
such  as  are  naturally  incident  to  competition — for  instance, 
more  advantageous  terms  in  the  way  of  discounts,  increased 
trade  and  otherwise.  In  the  Minnesota  case  there  was  among 
the  rules  of  the  association  a  clause  requiring  the  plaintiff  to 
pay  10  per  cent.,  but  the  propriety  or  the  legality  of  that  pro- 
vision was  not  involved.  In  Bowen  v.  Matheson,  it  is  true  that 
the  by-laws  provided  for  a  fine,  but  the  declaration  did  not 
charge  that  any  coercion  by  means  of  a  fine  had  been  used.  A 
demurrer  to  the  declaration  was  sustained  upon  the  ground 
that  there  was  no  sufficient  allegation  of  an  illegal  act.  The 
only  allegation  which  need  be  noticed  here  was  that  the  de- 
fendants "did  prevent  men  from  shipping  with"  the  plaintiff, 
and  as  to  this  the  court  said:  "This  might  be  done  in  many 
ways  which  are  legal  and  proper,  and,  as  no  illegal  methods 
are  stated,  the  allegation  is  bad."  This  comes  far  short  of 
sustaining  the  defendants  in  their  course  of  coercion  by  means 
of  fines.  As  to  the  other  cases  cited  by  the  defendants,  it  may 
be  said  that,  while  bearing  upon  the  general  subject  of  which 
the  present  case  presents  one  phase,  they  are  not  inconsistent 


THE  COMMON  LAW  487 

with  the  conclusion  to  which  we  have  come.  Among  the  au- 
thorities bearing  upon  the  general  subject,  and  having  some 
relation  to  the  questions  involved  in  this  case,  see,  in  addition 
to  those  hereinbefore  cited,  Slaughter  House  Cases,  16  Wall. 
116,  21  L.  Ed.  394;  Addyston  v.  United  States,  175  U.  S.  211, 
44  L.  Ed.  136 ;  Doremus  v.  Hennessy,  176  111.  608,  43  L.  R.  A. 
797,  802,  68  Am.  St.  Rep.  203;  Inter-Ocean  Publishing  Co.  v. 
Associated  Press,  184  111.  438,  48  L.  R.  A.  568,  75  Am.  St.  Rep. 
184;  State  v.  Stewart,  59  Vt.  273,  59  Am.  Rep.  710;  Olive  v. 
Van  Patten,  7  Tex.  Civ.  App.  630 ;  Barr  v.  Essex  Trades  Coun- 
cil, 53  N.  J.  Eq.  881;  Jackson  v.  Stanfield,  137  Ind.  592,  23 
L.  R.  A.  588 ;  Bailey  v.  Master  Plumbers,  103  Tenn.  99,  46  L. 
R.  A.  561;  Brown  v.  Jacobs  Pharmacy  Co.,  115  Ga.  429,  57 
L.  R.  A.  547,  90  Am.  St.  Rep.  126;  Mogul  Steamship  Co.  v. 
McGregor,  15  Q.  B.  D.  476;  Id.  21  Q.  B.  D.  544;  Id.  23  Q.  B.  D. 
598;  Id.  [1892]  A.  C.  25. 

For  the  reasons  above  stated,  a  majority  of  the  court  are  of 
opinion  that  the  case  should  have  been  submitted  to  the  jury. 

Exceptions  stistained. 


MACAULEY  BROS.  v.  TIERNEY 

(Supreme  Court  of  Rhode  Island,  1895.     19  R.  I.  255.) 

Bill  by  Macauley  Bros,  against  Patrick  Tierney  and  others 
to  enjoin  respondents  from  doing  certain  acts  to  the  detriment 
of  complainants'  businessv    Bill  dismissed. 

MATTESON,  C.  J.  The  complainants  are  master  plumbers, 
engaged  in  the  business  of  plumbing.  In  the  transaction  of 
their  business,  they  have  been  accustomed,  and  are  obliged,  to 
purchase  from  time  to  time  materials  from  wholesale  dealers 
in  Rhode  Island  and  other  parts  of  the  United  States,  and, 
among  others,  from  L,  H,  Tillinghast  &  Co.,  of  Providence, 
who,  with  the  New  England  Supply  Company,  are  the  only 
wholesale  dealers  in  plumbing  materials  in  this  state. 

The  respondents  are  also  master  plumbers,  and  officers  and 
members  of  the  Providence  Ma&ter  Plumbers'  Association,  a 
voluntary  association,  affiliated  with  the  National  Association 


488    COMBINATIONS  AND  RESTRAINT  OP  TRADE 

of  Master  Plumbers  of  the  United  States  of  America.  The 
latter  association,  on  June  26,  1894,  at  Baltimore,  in  convention 
assembled,  adopted  resolutions  that  they  would  withdraw  their 
patronage  from  any  firm  manufacturing  or  dealing  in  plumb- 
ing material  selling  to  others  than  master  plumbers;  that  the 
masters  should  demand  of  manufacturers  and  wholesale  deal- 
ers in  plumbing  material  to  sell  goods  to  none  but  master 
plumbers;  that  the  association  should  keep  a  record  of  all 
journeymen  and  plumbers  who  place  in  buildings  plumbing 
material  bought  by  consumers  of  manufacturers  or  dealers; 
that  a  committee  be  appointed  by  the  association  in  every  state 
and  county  for  the  purpose  of  reporting  to  the  proper  officers, 
at  its  head  office  in  the  state,  any  violations  of  these  resolu- 
tions; that  the  convention  urge  upon  the  association  to  perfect 
and  adopt  a  uniform  system  of  protection  for  the  trade  over 
their  entire  jurisdiction.  Subsequently,  a  resolution  of  amend- 
ment was  adopted,  at  St.  Louis,  that  the  interpretation  of  the 
resolutions  be  left  in  the  hands  of  the  executive  committee  with 
power.  Still  later,  a  resolution  was  adopted,  at  Washington, 
''that  it  is  the  sense  of  this  convention  that  in  the  future  the 
interpretation  of  the  term  of  'master  plumber,'  as  set  forth 
in  the  above  resolutions,  to  entitle  him  to  purchase  plumbing 
material,  be  construed  to  mean  master  plumbers  that  have 
qualified  under  state  or  local  enactments  where  such  exist." 

It  is  alleged  by  the  complainants  that  the  interpretation  put 
by  the  executive  committee  of  the  National  Association  on 
these  resolutions  is  that  those  only  are  to  be  regarded  as  master 
plumbers  who  are  members  of  the  National  Association,  or 
members  of  the  several  local  associations  affiliated  with  the 
National  Association;  that  the  complainants  have  been  in- 
f(wmed  by  various  wholesale  dealers  in  plumbing  materials  in 
the  United  States  outside  of  this  state  that  they  will  not  sell 
them  supplies  unless  they  shall  join  the  Providence  Master 
Plumbers'  Association,  and  that  these  dealers  are  forced  to 
refuse  to  sell  them  supplies  because  of  the  resolutions  referred 
to  and  the  interpretation  put  upon  them  by  the  executive  com- 
mittee of  the  National  Association,  and  because  of  the  action 
of  the  Plrovidence  Master  Plumbers'  Association  in  causing 
such  dealers  to  be  notified  not  to  sell  to  the  complainants, 
under  the  penalty,  in  case  of  their  continuing  to  do  so,  of  not 


THE  COMMON  LAW  489 

selling  to  any  member  of  the  association;  that  the  Providence 
Master  Plumbers'  Association,  acting  through  the  respondents, 
has  issued  notice  to  L.  H.  Tillinghast  &  Co,  and  the  New  Eng- 
land Supply  Company  to  sell  supplies  to  none  but  members  of 
the  association;  and  that,  in  consequence  of  these  notices,  these 
wholesale  dealers  have  notified  the  complainants  and  other 
master  plumbers  that  they  will  not  sell  plumbing  materials  to 
plumbers  not  members  of  the  Master  Plumbers'  Associations 
in  the  places  in  which  they  do  a  plumbing  business,  or  mem- 
bers of  the  National  Association;  and  that,  since  the  date 
limited  in  the  notices,  these  dealers  have  refused  to  sell  to  the 
complainants;  and  that  they  have  been  unable  to  purchase 
supplies  from  them  and  from  other  wholesale  dealers  in  the 
United  States,  because  they  are  not  members  of  the  Providence 
Master  Plumbers'  Association. 

The  bill  charges  that  the  Providence  Master  Plumbers'  Asso- 
ciation and  the  National  Association  have  conspired  together 
to  prevent  the  complainants  from  buying  supplies  anywhere 
in  the  United  States,  and  to  utterly  ruin  their  business,  unless 
they  will  submit  to  the  conditions  of  membership  in  and  be- 
come members  of  the  Providence  Master  Plumbers'  Associa- 
tion ;  avers  that  the  business  of  the  complainants  will  be  irreme- 
diably ruined  unless  the  respondents  are  enjoined  from  fur- 
ther action,  and  are  compelled  to  rescind  the  action  which  they 
have  already  taken ;  and  prays  that  the  respondents  may  be 
directed  to  rescind  the  notices  given,  and  all  orders  and  re- 
quests, both  oral  and  written,  to  any  and  all  dealers  in  plumb- 
ers'  supplies,  not  to  trade  with  such  dealers,  unless  they  shall 
refuse  to  sell  supplies  to  any  but  members  of  such  associations, 
and  to  rescind  and  withdraw  any  and  all  orders  and  requests 
to  the  National  Association  to  prevent  wholesale  dealers  out- 
side of  the  state  of  Rhode  Island  from  selling  supplies  to  the 
complainants ;  and  that  the  respondents  may  be  enjoined  from 
all  further  interference  with  the  complainants  by  notifying 
such  dealers  not  to  sell  to  them,  or  by  further  requests  to  said 
National  Association  to  prevent  them  from  buying  supplies 
anywhere  in  the  United  States.  Testimony  has  been  submitted 
by  the  complainants  tending  to  prove  the  allegations  of  the  bill. 

Assuming  that  the  allegations  are  fully  sustained  by  the 


490    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

proof,  have  the  complainants  made  a  case  entitling  tliem  to 
relief?    We  think  not. 

The  complainants  proceed  on  the  theory  that  they  are  en- 
titled to  protection  in  the  legitimate  exercise  of  their  business; 
that  the  sending  of  the  notices  to  wholesale  dealers  not  to  sell 
supplies  to  plumbers  not  members  of  the  association,  under  the 
penalty,  expressed  in  some  instances  and  implied  in  others,  of 
the  withdrawal  of  the  patronage  of  the  members  of  the  asso- 
ciations in  case  of  a  failure  to  comply,  was  unlawful,  because 
it  was  intended  to  injuriously  affect  the  plumbers  not  members 
of  the  association  in  the  conduct  of  their  business,  and  must 
necessarily  have  that  effect.  It  is  doubtless  true,  speaking 
generally,  that  no  one  has  a  right  intentionally  to  do  an  act 
with  the  intent  to  injure  another  in  his  business.  Injury, 
however,  in  its  legal  sense,  means  damage  resulting  from  a 
violation  of  a  legal  right.  It  is  this  violation  of  a  legal  right 
which  renders  the  act  wrongful  in  the  eye  of  the  law,  and 
makes  it  actionable.  If,  therefore,  there  is  a  legal  excuse  for 
the  act,  it  is  not  wrongful,  even  though  damage  may  result 
from  its  performance.  The  cause  and  excuse  for  the  sending 
of  the  notices,  it  is  evident,  was  a  selfish  desire  on  the  part  of 
the  members  of  the  association  to  rid  themselves  of  the  com- 
petition of  those  not  members,  with  a  view  to  increasing  the 
profits  of  their  own  business.  The  question,  then,  resolves 
itself  into  this :  Was  the  desire  to  free  themselves  from  com- 
petition a  sufficient  excuse,  in  legal  contemplation,  for  the 
sending  of  the  notices? 

We  think  the  question  must  receive  an  affirmative  answer. 
Competition,  it  has  been  said,  is  the  life  of  trade.  Every  act 
done  by  a  trader  for  the  purpose  of  diverting  trade  from  a 
rival,  and  attracting  it  to  himself,  is  an  act  intentionally  done, 
and,  in  so  far  as  it  is  successful,  to  the  injury  of  the  rival  in 
his  business,  since  to  that  extent  it  lessens  his  gains  and  profits. 
To  hold  such  an  act  wrongful  and  illegal  would  be  to  stifle 
competition.  Trade  should  be  free  and  unrestricted ;  and  hence 
every  trader  is  left  to  conduct  his  business  in  his  own  way, 
and  cannot  be  held  accountable  to  a  rival  who  suffers  a  loss  of 
profits  by  anything  he  may  do,  so  long  as  the  methods  he 
employs  are  not  of  the  class  of  which  fraud,  misrepresentation, 
intimidation,  coercion,  obstruction,  or  molestation  of  the  rival 


THE  COMMON  LAW  491 

or  his  servants  or  workmen,  and  the  procurement  of  violation 
of  contractual  relations,  are  instances. 

A  leading  and  well-considered  case  on  this  subject  was 
Steamship  Co.  v.  McGregor,  23  Q.  B.  Div.  598  [1892]  App  Cas. 
25.  In  this  case  the  defendants,  who  were  shipowners,  had 
formed  a  league  for  the  purpose  of  keeping  in  their  own  hands 
the  control  of  the  tea-carrying  trade  between  London  and 
China,  and  for  the  purpose  of  driving  the  plaintiff  and  other 
competing  shipowners  from  the  field.  The  acts  complained  of 
as  unlawful  by  which  the  defendants  sought  to  accomplish 
their  purpose  were:  (1)  The  offer  to  local  shippers  and  other 
agents  of  a  benefit  by  way  of  rebate  if  they  would  not  deal 
with  the  plaintiff,  which  was  to  be  lost  if  this  condition  was 
not  fulfilled;  (2)  the  sending  of  special  ships  to  Hankow,  in 
the  hope  by  competition  to  deprive  the  plaintiff's  vessels  of 
profitable  freight;  (3)  the  offer  at  Hankow  of  freights  at  so 
low  a  rate  as  not  to  repay  the  shipowner  for  his  adventure, 
in  order  to  smash  freights  and  frighten  the  plaintiff  from  the 
field;  (4)  pressure  put  on  their  own  agents  to  induce  them  to 
ship  only  by  the  defendants'  vessels,  and  not  by  the  plaintiff's. 
The  plaintiff  alleged  that  the  league  was  a  conspiracy,  and 
claimed  damages  and  an  injunction  against  a  continuance  of 
the  alleged  unlawful  acts.  It  was  held  that  since  the  acts  of 
the  defendants  were  not  in  themselves  unlawful,  and  were  done 
by  them  with  the  lawful  object  of  protecting  and  extending 
their  own  trade  and  increasing  their  profits,  and  as  they  had 
employed  no  unlawful  means,  the  plaintiff  had  no  cause  of 
action.  Bowen,  L.  J.,  remarks  (page  614):  "His  [the 
trader's]  right  to  trade  freely  is  a  right  which  the  law  recog- 
nizes and  encourages,  but  it  is  one  which  places  him  at  no 
special  disadvantage  as  compared  with  others.  No  man, 
whether  trader  or  not,  can,  however,  justify  damaging  another 
in  his  commercial  business  by  fraud  or  misrepresentation.  In- 
timidation, obstruction,  and  molestation  are  forbidden;  so  is 
intentional  procurement  of  the  violation  of  individual  rights, 
contractual  or  other,  assuming,  always,  that  there  is  no  just 
cause  for  it.  The  intentional  driving  away  of  customers  by 
show  of  violence  (Tarleton  v.  McGawley,  Peake,  270)  ;  the  ob- 
struction of  actors  on  the  stage  by  preconcerted  hissing  (Clif- 
ford V.  Brandon,  2  Camp.  358 ;  Gregory  v.  Brunswick,  6  Man. 


492    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

&  G.  205) ;  the  disturbance  of  wild  fowl  in  decoys  by  the  firing 
of  guns  (Carrington  v.  Taylor,  11  East,  571;  Keeble  v.  Hick- 
eringall,  Id.  574,  note)  ;  the  impeding  or  threatening  of  serv- 
ants or  workmen  (Garret  v.  Taylor,  Cro.  Jac.  567)  ;  the 
inducing  of  persons  under  personal  contracts  to  break  their 
contracts  (Bowen  v.  Hall,  L.  R.  6  Q.  B.  Div.  333;  Lumley  v. 
Gye,  2  El.  &  Bl.  216), — all  are  instances  of  such  forbidden  acts. 
But  the  defendants  have  been  guilty  of  none  of  these  acts. 
They  have  done  nothing  more  against  the  plaintiffs  than  to 
pursue  to  the  bitter  end  a  war  of  competition  waged  in  the 
interest  of  their  own  trade.  To  the  argument  that  competition 
so  pursued  ceases  to  have  a  just  cause  or  excuse  when  there  is 
ill  will  or  personal  intention  to  do  harm,  it  is  sufficient  to 
reply  *  *  *  that  there  was  here  no  personal  intention  to 
do  any  other  or  greater  harm  to  the  plaintiffs  than  such  as 
was  necessarily  involved  in  the  desire  to  attract  to  the  de- 
fendants' ships  the  entire  tea  freights  of  the  ports,  a  portion 
of  which  would  otherwise  have  fallen  to  the  plaintiff's  share. 
I  can  find  no  authority  for  the  doctrine  that  such  a  commercial 
motive  deprives  of  'just  cause  or  excuse'  acts  done  in  the 
course  of  trade  which  would  be  but  for  such  motive  justifiable. 
So  to  hold  would  be  to  convert  into  an  illegal  motive  the  in- 
stinct of  self-advancement  and  self-protection,  which  is  the 
very  incentive  to  all  trade.  To  say  that  a  man  is  to  trade 
freely,  but  that  he  is  to  stop  short  at  any  act  which  is  calcu- 
lated to  harm  other  tradesmen,  and  which  is  designed  to  attract 
business  to  his  own  shop,  would  be  a  strange  and  impossible 
counsel  of  perfection." 

The  case  at  bar  contains  no  element  of  the  character  of 
those  enumerated  by  the  lord  justice  which  are  forbidden  by 
law,  unless  the  threat  of  the  withdrawal  of  patronage  may  be 
considered  as  amounting  to  coercion.  We  do  not  think,  how- 
ever, that  such  a  threat  can  be  regarded  as  coercive  within  a 
legal  sense ;  for,  though  coercion  may  be  exerted  by  the  appli- 
cation of  moral  as  well  as  physical  force,  the  moral  force 
exerted  by  the  threat  was  a  lawful  exercise  by  the  members 
of  the  associations  of  their  own  rights,  and  not  the  exercise 
of  a  force  violative  of  the  rights  of  others,  as  in  the  cases  cited 
by  the  lord  justice.  It  was  perfectly  competent  for  the  mem- 
bers of  the  association,  in  the  legitimate  exercise  of  their  OAvn 


THE  COMMON  LAW  493 

business,  to  bestow  their  patronage  on  whomsoever  they  chose, 
and  to  annex  any  condition  to  the  bestowal  which  they  saw  fit. 
The  wholesale  dealers  were  free  to  comply  with  the  condition 
or  not,  as  they  saw  fit.  If  they  valued  the  patronage  of  the 
members  of  the  associations  more  than  that  of  the  nonmembers, 
they  would  doubtless  comply;  otherwise,  they  would  not. 

Closely  analogous  to  tLe  case  at  bar  was  the  recent  case  of 
Manufacturing  Co.  v.  Hollis,  54  Minn.  223.  The  plaintiff  was 
a  manufacturer  and  seller  of  lumber,  having  a  large  and  profit- 
able trade,  both  wholesale  and  retail,  in  Minnesota  and  the 
adjoining  states.  The  defendants,  comprising  from  25  to  50 
per  cent,  of  the  retail  lumber  dealers  in  the  states  referred  to, 
many  of  whom  were  or  had  been  customers  of  the  plaintiff, 
formed  an  association,  under  the  name  of  the  Northwestern 
Lumbermen's  Association,  for  the  protection  of  its  members 
against  sales  by  wholesale  dealers  and  manufacturers  to  con- 
tractors and  consumers,  by  which  they  mutually  agreed  that 
they  would  not  deal  with  any  manufacturer  or  wholesale  dealer 
who  should  sell  lumber  directly  to  consumers  not  dealers  at 
any  point  where  a  member  of  the  association  was  carrying  on 
a  retail  yard.  The  by-laws  provided  that  any  member  of  the 
association  doing  business  in  the  town  to  which  lumber  thus 
sold  by  a  manufacturer  or  wholesale  dealer  had  been  shipped 
should  notify  the  secretary  of  the  association,  within  30  days 
after  the  arrival  of  the  shipment  at  its  destination,  who  should 
thereupon  notify  the  manufacturer  or  wholesale  dealer  by 
whom  the  shipment  had  been  made  that  he  had  a  claim  against 
him  for  10  per  cent,  of  the  value  of  such  sale  at  the  point  of 
shipment;  that,  if  the  secretary  should  be  unable  to  obtain 
payment,  he  should  refer  the  matter  to  the  directors,  who 
should  hear  and  determine  the  claim ;  that,  if  the  manufacturer 
or  dealer  refused  to  abide  by  the  decision  of  the  directors,  it 
should  be  the  duty  of  the  secretary  to  immediately  notify  the 
members  of  the  association  of  the  name  of  the  manufacturer 
or  dealer,  and  that  he  refused  to  comply  with  the  rules  of  the 
association;  that,  if  any  member  continued  to  deal  with  such 
manufacturer  or  wholesale  dealer,  he  should  be  expelled  from 
the  association;  that,  whenever  the  secretary  of  the  associa- 
tion should  succeed  in  collecting  any  such  claim,  the  sum  col- 
lected should  be  paid  to  the  member  or  members,  in  equal 


494    COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

shares,  doing  business  at  the  place  of  the  sale.  The  plaintiff 
sold  two  bills  of  lumber  directed  to  consumers  or  contractors 
at  points  where  members  of  the  association  were  engaged  in 
business.  The  secretary  of  the  association,  having  been  in- 
formed of  the  fact,  notified  the  plaintiff,  in  pursuance  of  the 
provision  of  the  by-laws,  that  he  had  a  claim  against  him  for 
10  per  cent,  of  the  amount  of  the  sales.  Considerable  cor- 
respondence with  reference  to  the  matter  ensued,  in  which  the 
plaintiff  from  time  to  time  promised  to  adjust  the  claim,  but 
procrastinated  and  avoided  doing  so  until  finally  the  secretary 
threatened,  unless  the  claim  was  immediately  settled,  to  send 
the  notice  provided  by  the  by-laws  to  all  the  members  of  the 
association.  Thereupon  the  plaintiff  brought  its  suit  for  an 
injunction.  An  ex  parte  injunction  having  been  granted,  the 
defendants  obtained  an  order  for  the  complainants  to  show 
cause  why  it  should  not  be  dissolved.  The  court  refused  to 
dissolve  the  injunction,  but  on  appeal  the  order  continuing 
the  injunction  was  reversed.  The  court  says:  "Now,  when 
reduced  to  its  ultimate  analysis,  all  that  the  retail  dealers  have 
done  is  to  form  an  association  to  protect  themselves  from 
sales,  by  wholesale  dealers  or  manufacturers,  directly  to  con- 
sumers or  other  nondealers,  at  points  where  a  member  of  the 
association  is  engaged  in  the  retail  business.  The  means 
adopted  to  effect  this  object  are  simply  these:  They  agree 
among  themselves  that  they  will  not  deal  with  any  wholesale 
dealer  or  manufacturer  who  sells  directly  to  customers  not 
dealers  at  a  point  where  a  member  of  the  association  is  doing 
business,  and  provide  for  notice  being  given  to  all  their  mem- 
bers whenever  a  wholesale  dealer  or  manufacturer  makes  any 
such  sale.  That  is  the  head  and  front  of  the  defendants' 
offense.  It  will  be  observed  that  the  defendants  are  not  pro- 
posing to  send  notice  to  anybody  but  members  of  the  associa- 
tion. There  was  no  element  of  fraud,  coercion,  or  intimida- 
tion, either  towards  the  plaintiff  or  members  of  the  associa- 
tion. True,  the  secretary,  in  accordance  with  section  3  of  the 
by-laws,  made  a  demand  on  the  plaintiff  for  ten  per  cent,  on 
the  amount  of  the  two  sales.  But  this  iuAdolved  no  element  of 
coercion  or  intimidation,  in  the  legal  sense  of  those  terms.  It 
was  entirely  optional  with  the  plaintiff  whether  it  would  pay 
or  not.    If  it  valued  the  trade  of  the  members  of  the  associa- 


THE  COMMON  LAW  495 

tion  higher  than  that  of  the  nondealers  at  the  same  points,  it 
would  probably  conclude  to  pay;  otherwise,  not.  It  cannot 
be  claimed  that  making  this  demand  was  actionable ;  much  less 
that  it  constituted  any  ground  for  an  injunction;  and  hence 
this  matter  may  be  laid  entirely  out  of  view.  Now,  was  any 
coercion  proposed  to  be  brought  to  bear  on  the  members  of  the 
association  to  prevent  them  from  trading  with  the  plaintiff? 
After  they  received  the  notice,  they  would  be  at  entire  liberty 
to  trade  with  the  plaintiff  or  not,  as  they  saw  fit.  By  the  pro- 
visions of  the  by-laws,  if  they  traded  with  the  plaintiff,  they 
were  liable  to  be  'expelled';  but  this  simply  meant  cease  to 
be  members.  It  was  wholly  a  matter  of  their  own  free  choice 
which  they  preferred, — to  trade  with  the  plaintiff,  or  to  con- 
tinue members  of  the  association."  See,  also,  Payne  v.  Rail- 
road Co.,  81  Tenn.  507,  514-519;  Cote  v.  Murphy,  159  Pa.  St. 
420,  421 ;  Heywood  v.  Tillson,  75  Me.  225,  233. 

It  only  remains  to  notice  the  charge  of  conspiracy  contained 
in  the  bill,  upon  which  considerable  stress  has  been  laid,  as 
though  the  fact  that  the  action  of  the  members  of  the  associa- 
tions was  in  pursuance  of  a  combination  entitled  the  complain- 
ants to  relief.  To  maintain  a  bill  on  the  ground  of  conspiracy, 
it  is  necessary  that  it  should  appear  that  the  object  relied  on 
as  the  basis  of  the  conspiracy,  or  the  means  used  in  accomplish- 
ing it,  were  unlawful.  What  a  person  may  lawfully  do,  a 
number  of  persons  may  unite  with  him  in  doing,  without  ren- 
dering themselves  liable  to  the  charge  of  conspiracy,  provided 
the  means  employed  be  not  unlawful.  The  object  of  the  mem- 
bers of  the  association  was  to  free  themselves  from  the  com- 
petition of  those  not  members,  which,  as  we  have  seen,  is  not 
unlawful.  The  means  taken  to  accomplish  that  object  were 
the  agreement  among  themselves  not  to  deal  with  wholesale 
dealers  who  sold  to  those  not  members  of  the  associations,  and 
the  sending  of  notices  to  that  end  to  the  wholesalers.  This, 
as  we  have  also  seen,  was  not  unlawful.  Hence  it  follows 
that,  as  the  object  of  the  combination  between  the  members  of 
the  associations  was  not  unlawful,  nor  the  means  adopted  for 
its  accomplishment  unlawful,  there  is  no  ground  for  the  charge 
of  conspiracy,  and  the  fact  of  combination  is  wholly  imma- 
terial. Com.  V.  Hunt,  4  Mete.  (Mass.)  Ill,  129;  Bowen  v. 
Matheson,  14  AEen  499;  WeUington  v.  Small,  3  Cush.  145, 


496    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

150;  Carew  v.  Rutherford,  106  Mass,  1,  14;  Payne  v.  Railroad 
Co.,  81  Term.  507,  521;  Hunt  v.  Simonds,  19  Mo.  583,  588; 
Robertson  v.  Parks,  76  Md.  118,  134,  135;  Steamship  Co.  v. 
McGregor,  23  Q.  B.  Div.  598  [1892]  App.  Cas.  25;  Manufac- 
turing Co.  V.  HolHs,  54  Minn.  223,  234;  Delz  v.  Winfree,  80 
Tex.  400,  404. 

We  are  of  the  opinion  that  the  bill  should  be  dismissed. 


BROWN  &  ALLEN  v.  JACOBS'  PHARMACY  CO. 

(Supreme  Court  of  Georgia,  1902.    115  Ga.  429.) 

PISH,  J.  The  record  in  this  case  discloses  that  prior  to  the 
institution  of  the  present  action,  and  since  then,  there  existed 
in  the  United  States  three  organizations,  known,  respectively, 
as  the  Proprietary  Association  of  America,  the  National  Whole- 
sale Druggists'  Association,  and  the  National  Association  of 
Retail  Druggists.  These  associations,  occupying  each  toward 
the  others  close  and  intimate  relations,  had,  among  other 
things,  the  purpose  of  keeping  up  the  prices  of  proprietary 
medicines,  drugs,  and  other  articles  usually  dealt  in  by  those 
engaged  in  the  drug  trade.  A  local  association  was  formed  in 
Atlanta,  known  as  the  Atlanta  Retail  Druggists'  Association. 
When  it  was  first  organized,  Joseph  Jacobs,  secretary  and 
treasurer  of  the  Jacobs  Pharmacy  Company,  the  plaintiff  in 
the  present  case,  was  a  member  of  it;  but  at  that  time  it  was 
distinctly  understood  and  agreed  among  its  members  that  it 
was  to  undertake  no  action  with  reference  to  the  cutting  of 
prices  by  dealers  in  drugs,  or  to  control  prices  of  the  same. 
Afterwards  the  plaintiff,  either  by  its  methods  of  advertising, 
or  certain  things  that  it  did  in  the  conduct  of  its  business,  gave 
offense  to  the  members  of  this  association,  and  charges  were 
preferred  against  Jacobs.  He  then  withdrew  from  the  local 
association.  Some  of  the  members  of  that  association  were 
members  of  one  or  more  of  the  large  associations  above  re- 
ferred to.  After  the  retirement  of  Jacobs,  the  local  concern 
put  in  operation  a  scheme  to  prevent  the  pharmacy  company 
from  being  able  to  buy  goods  with  which  to  conduct  its  busi- 
ness.    The  main  features  of  that  scheme  were  that  the  local 


THE  COMMON  LAW  497 

concern,  by  circulars,  letters,  or  otherwise,  undertook  to  notify 
wholesalers  and  manufacturers  throughout  the  country  that 
the  pharmacy  company  was  an  aggressive  cutter,  and  to  re- 
quest the  persons  or  concerns  addressed  not  to  sell  it  any  more 
goods;  further,  to  require  all  salesmen  representing  the  manu- 
facturers or  wholesale  houses  to  procure  from  the  local  asso- 
ciation a  card,  in  order  to  procure  which  such  salesmen  had  to 
sign  an  agreement  not  to  sell  the  pharmacy  company  any 
goods;  and  another  part  of  the  scheme  was  to  give  the  manu- 
facturers and  wholesalers  to  understand  that,  unless  they  re- 
fused to  sell  the  plaintiff  any  goods,  the  members  of  the  local 
association  would  not  buy  any  more  goads  from  them.  In 
this  condition  of  affairs,  the  plaintiff  brought  its  equitable 
petition  against  the  defendants,  alleging,  in  substance,  the 
facts  set  forth  above,  and  praying  for  damages  for  alleged 
injuries  to  its  business  already  done,  and  for  an  injunction  to 
prevent  the  defendants  from  carrying  into  effect  the  scheme 
above  outlined.  The  petition  charged  that  the  scheme  was  an 
unlawful  conspiracy  to  destroy  the  plaintiff's  business,  and  it 
more  fully  set  out  the  manner  in  which  this  scheme  was  to  be 
effectuated,  by  setting  forth  as  exhibits,  marked  "A,"  "B," 
and  "C,"  certain  letters,  etc.,  by  means  of  which  the  defend- 
ants were  seeking  to  accomplish  the  alleged  unlawful  purpose 
which  the  plaintiff  was  seeking  to  restrain.  These  exhibits 
were  as  follows: 

"Exhibit  A.  Atlanta,  Ga.,  March  28,  1901.  C.  L.  Stoney, 
President;  W.  B.  Freeman,  Vice  President;  R.  L.  Palmer, 
Treasurer;  W.  S.  Elkin,  Jr.,  Secretary.  Atlanta  Druggists' 
Association.  Gentlemen :  Inclosed  please  find  a  copy  of  a 
resolution  recently  adopted  by  the  Atlanta  Druggists'  Asso- 
ciation. There  are  fifty-eight  retail  druggists  and  three  whole- 
sale druggists  in  this  city,  and  among  this  number  only  one, 
a  retailer,  is  designated  as  an  aggressive  cutter.  Believing 
that,  from  a  business  standpoint,  you  would  prefer  the  aid  and 
support  of  fifty-eight  (two  of  the  wholesalers  are  also  retailers) 
legitimate  druggists,  rather  than  that  of  one  cutter,  we  feel 
sure  that  it  will  afford  you  pleasure  to  sign  the  inclosed  agree- 
ment. Awaiting  an  early  reply,  I  am  yours  very  truly,  [signed] 
W.  S.  Elkin,  Secretary. 

"Exhibit  B.     We,   the   undersigned,  hereby  agree  to  sell 

Kales  K.  of  T,  Vol.  1—32 


498    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

goods  of  our  manufacture  (or  manufactured  by  any  other 
house  that  we  may  handle)  in  the  city  of  Atlanta,  Ga.,  and 
adjoining  districts,  only  to  those  druggists  who  are  members 
of  the  Atlanta  Druggists'  Association,  and  any  others  who 
have  not  been  designated  as  aggressive  cutters.  We  further 
agree  not  to  sell  any  goods  to  department  stores  in  the  above- 
mentioned  territory.  We  reserve  the  right  to  cancel  this  con- 
tract by  giving  notice  to  the  secretary  of  Atlanta  Druggists' 
Association.     Date,  . 

''Exhibit  C.  A  copy  of  resolution  adopted  by  the  Atlanta 
Druggists'  Association,  March  22d,  1901:  Resolved:  (1) 
That  the  Atlanta  Druggists'  Association  adopt  a  card  for 
salesmen  reading:  'This  is  to  certify  that  Mr.  ,  repre- 
senting   ,  has  qualified,  and  is  hereby  recommended  to  the 

members  of  our  association.    Date,  .    ,  Secretary. 

(This  card  is  only  good  for  30  days  from  date.) ' 

"(2)  That -salesmen's  cards  shall  be  required  of  all  sales- 
men representing  as  follows:  Drug  jobbers;  patent  medicine 
manufacturers;  pharmaceutical  houses;  proprietary  medicine 
manufacturers;  druggists'  sundry  houses  who  carry  patent 
and  proprietary  medicines,  proprietary  articles,  and  medicated 
soaps ;  manufacturers  of  surgical  supplies ;  and  manufacturers 
of  paper  boxes  and  labels. 

"(3)  That  the  secretary  shall  issue  cards  only  to  salesmen 
who  sign  an  agreement  not  to  sell  directly  or  indirectly  any 
aggressive  cutter  or  any  department  store.  This  agreement 
to  be  binding  to  house  represented  by  salesmen  signing  same. 

"(4)  That  where  new  remedies  are  being  introduced,  the 
salesmen  require  each  purchaser  to  sign  contract  to  sell  such 
remedy  at  full  printed  or  implied  price. 

"(5)  That  a  copy  of  these  resolutions  be  furnished  each 
manufacturer  who  is  requested  to  sign  agreement," 

The  case  was  heard  before  Hon.  J.  H.  Lumpkin,  Judge 
of  the  Atlanta  circuit,  upon  the  application  for  an  interlocu- 
tory injunction.  A  considerable  amount  of  evidence  was  in- 
troduced, concerning  which  it  is  sufficient  to  say  that  the 
plaintiff  established,  substantially,  the  material  allegations  of 
its  petition.  It  claimed  an  injunction  both  upon  the  general 
principles  of  the  common  law,  and  also  under  the  terms  of 
what  is  commonly  known  as  the  "Anti-Trust  Act"  (Acts  1896, 


THE  COMMON  LAW  499 

p.  68),  passed  by  the  general  assembly  of  this  state  in  1896. 
The  defendants  attacked  the  constitutionality  of  that  act, 
alleging  that  it  is  in  violation  of  the  fourteenth  amendment 
of  the  constitution  of  the  United  States,  in  that  it  denies  to 
them  the  equal  protection  of  the  law,  and  deprives  them  of 
liberty  and  property  without  due  process  of  law,  and  also 
abridges  their  liberties  and  immunities  as  citizens  of  the  United 
States ;  that  it  is  class  legislation,  and  violates  article  1,  §  4, 
par.  1,  of  the  constitution  of  Georgia.  The  judge  granted  the 
injunction  substantially  as  prayed.  After  a  careful  investiga- 
tion, we  are  satisfied  that  he  was  right  in  so  doing,  except  in 
so  far  as  it  was  made  operative  against  the  Lamar-Rankin  Drug 
Company,  one  of  the  defendants  which  was  not  a  member  of 
tlie  local  association  mentioned  above,  and  against  which,  there- 
fore, no  injunction  should  have  been  granted.  This  minor 
error  or  inadvertency  has  been  corrected  by  an  appropriate 
direction  in  the  judgment  rendered  by  this  court.  It  would 
not  be  profitable  to  set  out,  or  even  summarize,  the  voluminous 
evidence  which  was  introduced  at  the  hearing.  We  have  al- 
ready, in  effect,  stated  that  the  evidence  was  sufficient  to 
establish  favorably  to  the  plaintiff  its  contentions  of  fact.  We 
shall  therefore  confine  our  discussion  to  the  questions  of  law 
involved  in  the  present  writ  of  error.  Their  nature  will  be 
gathered  from  what  has  already  been  said,  and  from  an  exam- 
ination of  the  headnotes  preceding  this  opinion.  We  have 
been  relieved  of  much  labor  by  reason  of  the  fact  that  the 
learned  and  able  judge  of  the  trial  court  filed  in  the  case  an 
elaborate  and  carefully  prepared  opinion.  What  follows  is 
taken  almost  literally  from  the  same.  We  omit,  save  as  to  ex- 
tracts from  authorities  made  by  him,  the  use  of  quotation 
marks,  for  the  sake  of  convenience,  as  we  have  seen  fit  to 
make  some  omissions,  changes,  and  additions  as  to  the  several 
propositions  stated  and  discussed  by  his  honor.  It  is  but  fair, 
however,  to  add  that  the  material  which  we  have  rendered 
available  was  all  supplied  by  the  work  done  by  the  judge 
below. 

A  conspiracy  has  been  defined  as  a  combination  either  to 
accomplish  an  unlawful  end,  or  to  accomplish  a  lawful  end  by 
unlawful  means.  This  form  of  expression  was  used  by  Lord 
Denman  in  Rex  v,  Seward  (1834)   1  Adol.  &  E.  706;  Jones' 


500    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Case  (1832)  4  Barn.  &  Adol.  345.  And  though  he  is  reported 
to  have  expressed  himself  somewhat  differently  in  other  cases 
(see  passing  remark  in  Reg.  v.  Peck  [1839]  9  Adol.  &  E.  686), 
this  definition  has  been  very  widely  accepted  and  quoted.  See 
Bouv.  Law  Diet.,  word,  "Conspiracy."  Mr.  Eddy,  in  his  recent 
work  on  Combinations,  gives  the  following  definition,  as  com- 
prehensive in  its  nature,  and  including  both  civil  and  criminal 
conspiracies:  "Conspiracy  is  the  combination  of  two  or  more 
persons  to  do  (a)  something  that  is  unlawful,  oppressive,  or 
immoral;  or  (b)  something  that  is  not  unlawful,  oppressive, 
or  immoral,  by  unlawful,  oppressive,  or  immoral  means;  (c) 
something  that  is  unlawful,  oppressive,  or  immoral,  by  unlaw- 
ful, oppressive,  or  immoral  means."  1  Eddy,  Comb'ns,  §§  171, 
340.  Conspiracies  are  often  spoken  of  as  civil  or  criminal. 
The  terms  "criminal"  and  "civil"  are  used,  respectively,  to 
designate  a  conspiracy  which  is  indictable,  or  a  conspiracy 
which  will  furnish  ground  for  a  civil  action.  To  render  a 
conspiracy  indictable  at  common  law,  no  overt  acts  in  carry- 
ing out  the  design  of  the  conspirators  were  necessary.  The 
conspiring  was  sufficient  to  authorize  an  indictment.  Yet  it 
will  be  readily  perceived  that  if  the  conspirators  stopped  with 
conspiring,  and  did  nothing  further  in  execution  of  the  design, 
no  injury  would  have  been  done  which  would  furnish  a  basis 
for  a  civil  action.  But  if,  in  carrying  out  the  design  of  the 
conspirators,  overt  acts  were  done,  causing  legal  damage,  the 
person  damaged  had  a  right  of  action.  Savile  v.  Roberts,  1 
Ld.  Raym.  378.  Hence  arose  the  dictum  that  the  gist  of  crim- 
inal conspiracy  is  the  combination,  and  the  gist  of  civil  con- 
spiracy is  the  injury  or  damage.  And  from  this  came  certain 
rulings  applicable  to  the  two,  respectively,  which  need  not  be 
discussed.  Mr.  Eddy  says:  "The  law  of  civil  conspiracy  is 
a  wider  development  and  application  of  the  law  of  criminal 
conspiracy.  So  far  as  rights  and  remedies  are  concerned,  all 
criminal  conspiracies  are  embraced  within  civil  conspiracies. 
The  definition  of  the  latter  embraces  the  former."  1  Eddy, 
Comb'ns,  §364.  That  contracts  and  agreements  in  general 
restraint  of  trade  are  contrary  to  public  policy  and  void  is  a 
principle  so  universally  recognized  that  citation  of  authority 
is  unnecessary  to  support  it.  It  has  been  crystallized  in  sec- 
tion 3668  of  the  Civil  Code  of  this  state,  where  the  expression 


THE  COMMON  LAW  501 

is  that  contracts  "in  general  restraint  of  trade"  are  contrary 
to  public  policy.  Differences  of  opinion  arise  only  when  this 
general  principle  is  to  be  applied  to  a  particular  case.  Thus 
it  is  suggested,  inasmuch  as  the  evidence  shows  that  not  all  of 
the  druggists  of  Atlanta  are  members  of  the  local  association, 
but  only  about  three-fourths  of  them,  that  the  combination  or 
agreement  was  not  obnoxious  to  this  rule,  or  the  rule  declaring 
agreements  or  contracts  tending  to  monopoly  against  public 
policy,  even  if  it  would  have  been  so,  were  all  members.  We 
do  not  think  this  distinction  sound.  Nothing  is  more  common 
than  for  the  courts  to  declare  contracts  between  only  two  per- 
sons, who  by  no  means  control  a  particular  kind  of  business, 
void,  as  contrary  to  public  policy.  It  is  the  nature  or  char- 
acter and  tendency  of  the  agreement  which  renders  it  objec- 
tionable, whether  in  fact  the  parties  to  it  succeed  in  restraining 
trade  generally,  or  stifling  competition,  or  not.  As  to  the 
matter  of  monopoly,  it  may  also  be  said  that  if  parties  make 
contracts  or  agreements  seeking  to  establish  a  monopoly,  and 
do  establish  it  as  far  as  they  can,  surely  they  cannot  say  that 
the  effort  is  legal  if  not  completely  successful. 

In  More  v.  Bennett  (111.  1892)  29  N.  E.  888,  15  L.  R.  A.  361, 
33  Am.  St.  Rep.  216,  it  was  held  that  an  association  of  stenog- 
raphers, of  which  one  object  was  to  control  the  prices  to  be 
charged  for  stenographic  work  by  its  members,  by  restraining 
all  competition  between  them,  was  an  illegal  combination,  al- 
though only  a  small  portion  of  the  stenographers  of  the  city 
belonged  to  it.  In  the  opinion,  Bailey,  J.  (page  891,  29  N. 
E.,  page  364,  15  L.  R.  A.,  33  Am.  St.  Rep.  216),  says:  "Con- 
tracts in  partial  restraint  of  trade  which  the  law  sustains  are 
those  which  are  entered  into  by  a  vendor  of  a  business  and  its 
good  will  with  his  vendee,  by  which  the  vendor  agrees  not  to 
engage  in  the  same  business  within  a  limited  territory;  and 
the  restraint,  to  be  valid,  must  be  no  more  than  is  reasonably 
necessary  for  the  protection  of  the  vendee  in  the  enjoyment 
of  the  business  purchased,"  To  this  have  sometimes  been 
added  agreements  of  partnership  or  employment.  Mr.  Tiede- 
man  says:  "Following  the  reason  of  the  rule  which  prohibits 
contracts  in  restraint  of  trade,  we  find  that  it  is  made  to  pro- 
hibit all  contracts  which  in  any  way  restrain  the  freedom  of 
trade  or  diminish  competition,  or  regulate  the  prices  of  com- 


502    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

modities  or  services."  Tied.  Com.  Paper,  §  190.  In  Anderson 
V.  Jett  (Ky.;  1889)  12  S.  W.  670,  6  L.  R.  A.  390,  392,  it  was 
held:  "Rivalry  is  the  life  of  trade.  The  thrift  and  welfare 
of  the  people  depend  upon  it.  Monopoly  is  opposed  to  it,  all 
along  the  line.  *  *  *  The  combination  or  agreement, 
whether  or  not  in  the  particular  instance  it  has  the  desired 
effect,  is  void.  The  vice  is  in  the  combination  or  agreement. 
The  practical  evil  effect  of  the  combination  only  demonstrates 
its  evil  character;  but  if  its  object  be  to  prevent  or  impede 
free  and  fair  competition  in  trade,  and  may  in  fact  have  that 
tendency,  it  is  void,  as  being  against  public  policy."  See, 
also,  Oil  Co.  V.  Adove  (1892)  83  Tex.  650,  15  L.  R.  A.  598,  29 
Am.  St.  Rep.  690;  People  v.  Sheldon,  139  N.  Y.  251,  263,  264, 
23  L.  R.  A.  221,  36  Am,  St.  Rep.  690.  Under  such  circumstances 
the  agreement  is  void,  although  the  prices  fixed  at  the  time 
may  have  been  reasonable.  Association  v.  Kock,  14  La.  Ann. 
168. 

Judge  Taft,  in  the  circuit  court  of  appeals  of  the  Sixth 
circuit  of  the  United  States,  in  an  able  decision  in  the  case  of 
U.  S.  V.  Addystone  Pipe  &  Steel  Co.,  29  C.  C.  A.  141,  46  L.  R. 
A.  122  et  seq.,  reviews  the  authorities  on  this  subject.  Among 
other  things,  he  says  (29  C.  C.  A.  152,  46  L.  R.  A.  131) :  "Much 
has  been  said  in  regard  to  the  relaxing  of  the  original  strict- 
ness of  the  common  law  in  declaring  contracts  in  restraint  of 
trade  void,  as  conditions  of  civilization  and  public  policy  have 
changed;  and  the  argument  drawn  therefrom  is  that  the  law 
now  recognizes  that  competition  may  be  so  ruinous  as  to  injure 
the  public,  and  therefore  that  contracts  made  with  a  view  to 
check  such  ruinous  competition  and  regulate  prices,  though 
in  restraint  of  trade,  and  having  no  other  purpose,  will  be 
upheld.  We  think  this  conclusion  is  unwarranted  by  the 
authorities,  when  all  of  them  are  considered.  *  *  *  The 
manifest  danger  in  the  administration  of  justice  according  to 
so  shifting,  vague,  and  indeterminate  a  standard  would  seem 
to  be  a  strong  reason  against  adopting  it."  After  considering 
a  number  of  authorities,  he  says  (page  160,  29  C.  C.  A.,  page 
290,  85  Fed.,  page  136,  46  L.  R,  A.)  :  "In  the  foregoing  cases 
the  only  consideration  of  the  agreement  restraining  the  trade 
of  one  party  was  the  agreement  of  the  other  to  the  same  effect, 
and  there  was  no  relation  of  partnership,  or  of  vendor  and 


THE  COIVmON  LAW  503 

vendee,  or  of  employer  and  employe.  Where  such  relation 
exists  between  the  parties,  as  already  stated,  restraints  are 
usually  enforceable,  if  commensurate  only  with  the  reasonable 
protection  of  the  covenantee  in  respect  to  the  main  transactions 
affected  by  the  contract.  But  in  recent  years  even  the  fact 
that  the  contract  is  one  for  the  sale  of  property  or  of  business 
and  good  will,  or  for  the  making  of  a  partnership  or  a  cor- 
poration, has  not  saved  it  from  invalidity,  if  it  could  be  shown 
that  it  was  only  part  of  a  plan  to  acquire  all  the  property 
used  in  a  business  by  one  management,  with  a  view  to  estab- 
lishing a  monopoly.  *  *  *  Upon  this  review  of  the  law 
and  the  authorities,  we  can  have  no  doubt  that  the  association 
of  the  defendants,  however  reasonable  the  prices  they  fixed, 
however  great  the  competition  they  had  to  encounter,  and 
however  great  the  necessity  for  curbing  themselves  by  joint 
agreement  from  committing  financial  suicide  by  ill-advised 
competition,  was  void  at  common  law,  because  in  restraint  of 
trade,  and  tending  to  a  monopoly." 

This  exactly  answers  one  of  the  arguments  advanced  in  the 
present  case.  It  is  contended  that  the  members  of  the  Atlanta 
Druggists'  Association  were  not  seeking  to  restrain  trade  or 
create  a  monopoly,  but  were  only  seeking  to  defend  themselves 
against  the  cutting  of  prices  by  the  Jacobs  Pharmacy  Com- 
pany, and  that  really  they  were  fighting  an  effort  at  monopoly. 
That  58  druggists  in  the  city  of  Atlanta  should  seriously  claim 
to  be  in  danger  of  a  monopoly  from  1,  which  is  not  shown  to 
have  any  more  capital  than  any  of  them,  or  any  more  facilities 
for  trade,  or  to  be  making  any  combination,  or  in  fact  doing 
anything  to  cause  the  present  action  on  their  part,  except 
selling  some  articles  of  merchandise  at  low  rates,  is  a  position 
which  cannot  be  sustained.  This  is  the  argument  which  is 
almost  universally  advanced  by  every  monopoly  or  combina- 
tion in  restraint  of  trade.  If  it  is  sustained  by  the  courts,  then 
the  rules  of  law  as  to  such  contracts  and  agreements  might  as 
well  be  wiped  off  the  statute  books. 

The  decision  just  cited  was  affirmed  by  the  supreme  court  of 
the  United  States  in  1899,  except  as  to  one  mere  inadvertence 
in  respect  to  iaterstate  commerce.  In  the  decision  the  follow- 
ing is  quoted  approvingly  from  the  opinion  of  Judge  Taft: 
"It  has  been  earnestly  pressed  upon  us  that  the  prices  at 


504    COMBINATIONS  AND  RESTEAINT  OF  TRADE 

which  the  cast  iron  pipe  was  sold  in  'pay'  territory  were  rea- 
sonable. *  *  *  "We  do  not  think  the  issue  an  important 
one,  because,  as  already  stated,  we  do  not  think  that  at  com- 
mon law  there  is  any  question  of  reasonableness  open  to  the 
courts  with  reference  to  such  a  contract.  Its  tendency  was 
certainly  to  give  defendants  the  power  to  charge  unreasonable 
prices,  had  they  chosen  to  do  so."  175  U.  S.  211,  237,  106,  44 
L.  Ed.  136,  146. 

Again,  some  courts  have  sought  to  draw  a  distinction  be- 
tween what  they  term  "necessaries,"  or  "the  necessaries  of 
life,"  or  "prime  necessaries,"  and  contracts  or  agreements 
with  reference  to  other  articles  of  commerce  or  merchandise. 
But  this  distinction  is  not  well  founded.  What  is  at  one  time 
a  luxury  at  another  is  a  necessity.  The  things  which  were 
considered  sufficient  to  satisfy  the  description  of  necessaries 
a  few  years  ago,  would  be  considered  wholly  insufficient  now, 
under  present  conditions  of  civilization.  How  useful  must  a 
thing  become  before  it  enters  the  catalogue  of  necessaries,  so 
that  contracts  to  restrain  trade  in  regard  to  it,  or  to  foster  a 
monopoly  in  it,  are  void?  The  unsoundness  in  principle  of 
such  a  distinction  was  treated  of  by  Judge  Taft  in  the  Case 
of  Addystone  Pipe  &  Steel  Co.,  already  referred  to.  But  if 
it  were  sound,  it  may  be  of  interest  to  consider  some  of  the 
articles  which  have  been  held  of  such  necessity.  In  a  note 
to  be  found  in  74  Am.  St.  Rep.  268,  269,  to  the  case  of  Harding 
V.  Glucose  Co.  (111.  Sup.)  55  N.  E.  577,  the  following  are  set 
out  as  having  been  held  of  such  necessity  as  to  make  a  com- 
bination in  regard  to  them  illegal :  Beer,  alcohol,  distilling 
products,  preserves,  gas  pipes,  powder,  harrows,  capsules,  en- 
velopes, wire  cloth,  bluestone,  cigarettes,  etc.  Now,  if  these 
articles  are  to  be  ranked  as  necessaries,  within  the  rule,  it 
might  as  well  be  said  at  once  that  the  rule  applies  to  articles 
of  merchandise  generally. 

The  next  position  of  the  defendants,  and  the  one  which,  on 
first  presentation,  seems  to  be  their  strongest  defense  on  this 
part  of  the  case,  is  that  at  common  law  contracts  or  agree- 
ments in  general  or  unreasonable  restraint  of  trade  were  merely 
void  and  unenforceable ;  that  either  party  could  defend  against 
an  action  based  on  them,  but  that  they  were  not  illegal,  in  such 
sense  as  to  give  a  right  of  action  to  third  parties.    While  there 


THE  COMMON  LAW  505 

may  be  conflict  among  the  authorities,  it  seems  to  us  that  some 
confusion  might  have  been  avoided  by  bearing  in  mind  the 
distinction  between  a  contract  or  agreement  merely  in  re- 
straint of  trade  as  between  the  parties,  and  a  combination  or 
contract  to  stifle  competition,  or  a  conspiracy  to  ruin  a  com- 
petitor. Thus,  if  one  of  two  rival  merchants,  not  purchasing 
the  business  of  the  other,  contracted  with  him  that  the  latter 
should  cease  business,  and  never  enter  mercantile  pursuits  at 
any  time  or  place,  the  contract  would  be  in  general  restraint 
of  trade,  and  void,  and  could  not  be  enforced.  But  it  alone 
would  not  give  a  right  of  action  to  third  parties ;  and  although 
the  retiring  from  business  of  one  of  the  merchants  might 
lessen  facilities  for  trading,  and  incidentally  cause  inconve- 
nience or  even  put  it  in  the  power  of  the  other  to  raise  his  prices, 
the  contract,  as  such,  would  merely  be  void.  But  on  the  other 
hand,  suppose  that  two  merchants  should  agree  that  one  should 
retire  from  business,  and  that  no  other  person  should  open  a 
similar  business,  and,  if  he  did  so,  that  the  two  would  drive 
away  his  customers,  or  break  up  his  business  by  violence, 
threats,  or  like  means;  it  would  get  beyond  the  domain  of  a 
mere  nonenforceable  contract,  into  the  domain  of  a  conspiracy. 
Or  suppose  that  a  number  of  merchants  should  agree  to  fix 
the  price  of  certain  goods,  and  not  to  sell  below  that  price;  if 
there  were  no  statute  on  the  subject,  and  the  case  rested  on 
the  common  law,  the  agreement  would  simply  be  nonenforce- 
able; but  if  they  went  further,  and  agreed  that,  if  any  other 
merchant  sold  at  a  less  price,  they  would  force  him  to  their 
terms,  or  drive  away  those  dealing  with  him,  by  violence, 
threats,  or  boycotting,  it  would  cease  to  be  a  mere  nonenforce- 
able contract,  and  if,  in  its  execution,  damages  proximately 
resulted  to  such  other  merchant,  he  would  have  a  right  of 
action.  For  two  or  more  people  to  make  an  agreement  which 
neither  can  enforce  at  law  against  the  other  is  one  thing;  but 
to  further  agree,  and  under  that  agreement  proceed  to  force 
another  who  is  no  party  to  it,  against  his  will,  to  be  governed 
by  it,  under  penalty  of  financial  ruin  by  driving  off  his  cus- 
tomers, or  the  like,  is,  to  use  a  favorite  expression  of  Former 
Chief  Justice  Warner,  "another  and  quite  a  different 
thing."  There  is  no  inherent  wrong  in  the  mere  act  of  firing 
a  pistol  in  a  place  where  not  prohibited  by  law,  but  it  may 


506    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

become  very  wrong  if  it  is  fired  at  the  person  or  property  of 
another,  and  may  give  a  right  of  action  to  him  for  resulting 
injury.  A  combination,  like  a  revolver,  should  not  be  aimed 
maliciously  or  with  a  reckless  disregard  of  the  rights  of  others. 

Doremus  v.  Hennessy,  176  111.  608,  43  L.  R.  A.  797,  802,  68 
Am.  St.  Rep.  203,  was  an  action  on  the  case  for  damages  on 
the  ground  that  the  members  of  an  organization  known  as  the 
Chicago  Laundrymen's  Association  had  fixed  a  scale  of  prices 
for  laundry  work,  and  had  conspired  to  injure  the  plaintiff  in 
her  good  name  and  credit,  and  to  destroy  her  business,  be- 
cause she  would  not  charge  prices  in  accordance  with  such 
scale,  and  they  were  proceeding  to  carry  out  the  conspiracy. 
It  was  held  actionable.  The  court  said:  "A  combination  by 
them  to  induce  others  not  to  deal  with  appellee  or  enter  into 
contracts  with  her,  or  to  do  any  further  work  for  her,  was  an 
actionable  wrong.  Every  man  has  a  right,  under  the  law,  as 
between  himself  and  others,  to  full  and  free  disposition  of  his 
own  labor  and  capital  according  to  his  own  free  will,  and  any 
one  who  invades  that  right  without  lawful  cause  of  justifica- 
tion commits  a  legal  wrong,  and,  if  followed  by  an  injury 
caused  in  consequence  thereof,  the  one  whose  right  is  thus 
invaded  has  a  legal  ground  of  action  for  such  wrong.  *  *  * 
An  intent  to  do  a  wrongful  harm  and  injury  is  unlawful,  and, 
if  a  wrongful  act  is  done  to  the  detriment  of  the  right  of  an- 
other, it  is  malicious;  and  an  act  maliciously  done  with  the 
intent  and  purpose  of  injuring  another  is  not  lawful  competi- 
tion." 

Boutwell  V.  Marr  (Vt.;  1899)  42  Atl.  607,  609,  43  L.  R.  A. 
803,  805,  76  Am.  St.  Rep.  746,  was  an  action  for  damages.  An 
association  of  granite  manufacturers  prohibited,  by  resolu- 
tions, sales  by  its  members  to  persons  engaged  in  cutting, 
quarrying,  or  polishing  granite  in  the  New  England  states, 
New  York  City,  and  Vermont,  who  were  not  members,  which 
enumeration  included  plaintiffs.  There  was  a  by-law  which 
prohibited  dealing  with  members  not  in  good  standing,  and 
imposed  fines  for  the  violation  of  its  rules.  The  defense  did 
not  concede  that  such  a  by-law  was  more  coercive  than  to 
attempt  to  compel,  by  threats  or  intimidation,  persons  not 
members  of  the  association  to  withdraw  their  patronage  from 
plaintiffs,  but  contended  that  the  by-law  was  less  objection- 


THE  COIMMON  LAW  507 

able,  because  applying  to  members  only.  The  court  held  both 
to  be  alike  unlawful.  It  said  (page  609,  42  Atl.,  page  805,  43 
L.  R.  A.,  76  Am.  St.  Rep.  746):  "Without  undertaking  to 
designate  with  precision  the  lawful  limit  of  organized  effort; 
it  may  safely  be  affirmed  that  when  the  will  of  a  majority  of 
an  organized  body,  in  matters  involving  the  rights  of  outside 
parties,  is  enforced  upon  its  members  by  means  of  fines  and 
penalties,  the  situation  is  essentially  the  same  as  when  unity 
of  action  is  secured  among  unorganized  individuals  by  threats 
or  intimidation.  The  withdrawal  of  patronage  by  concert  of 
action,  if  legal  in  itself,  becomes  illegal  when  the  concerted 
action  is  procured  by  coercion.  *  *  *  It  is  clear  that  if 
the  association  had  comprised  but  a  small  portion  of  the  manu- 
facturers, and  had  destroyed  the  plaintiffs'  business  by  com- 
pelling the  manufacturers  to  join  them  in  withholding  patron- 
age, the  members  would  have  been  liable."  In  Inter-Ocean 
Pub.  Co.  V.  Associated  Press  (111.;  1900)  56  N.  E.  822,  826,  48 
L.  R.  A.  568,  75  Am.  St.  Rep.  184,  an  injunction  was  granted. 
The  court  said:  "Competition  can  never  be  held  hostile  to 
public  interests,  and  efforts  to  prevent  competition  by  con- 
tract or  otherwise  can  never  be  looked  upon  with  favor  by 
the  courts."  In  People  v.  Chicago  Live  Stock  Exchange,  170 
111.  556,  39  L.  R.  A.  373,  62  Am.  St.  Rep.  404,  it  is  said  (page 
566,  170  111.,  and  page  1065,  48  N.  E.,  39  L.  R.  A.  373,  62  Am. 
St.  Rep.  404)  :  "Efforts  to  prevent  competition  and  to  restrict 
individual  efforts  and  freedom  of  action  in  trade  and  com- 
merce are  restrictions  hostile  to  the  public  welfare,  not  con- 
sonant with  the  spirit  of  our  institutions,  and  in  violation  of 
law."  Similar  language  is  used  in  the  case  last  above  cited. 
56  N.  E.  826,  48  L.  R.  A.  568,  75  Am.  St.  Rep.  184.  In  Beck  v. 
Union  (Mich.;  1898)  77  N.  W.  13,  42  L.  R.  A.  407,  74  Am.  St. 
Rep.  421,  an  application  for  injunction  was  sustained.  The 
court  said  (page  24,  77  N.  W.,  page  418,  42  L.  R.  A.,  74  Am. 
St.  Rep.  421):  "The  boycott  condemned  by  the  law  is  not 
alone  that  accompanied  by  violence  and  threats  of  violence, 
but  that  where  the  means  used  are  threatening  in  their  nature, 
and  intended  and  naturally  tend  to  overcome,  by  fear  of  loss 
of  property,  the  will  of  others,  and  compel  them  to  do  things 
which  they  would  not  do  otherwise." 

State  V.  Stewart,  59  Vt.  273,  59  Am.  Rep.  710,  arose  on  a 


508    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

demurrer  to  an  indictment.  In  the  opinion,  Powers,  J.  (9 
Atl.  567,  59  Am.  Rep.  713),  said:  "The  Reports,  English  and 
American,  are  full  of  illustrations  of  the  doctrine  that  a  com- 
bination of  two  or  more  persons  to  effect  an  illegal  purpose, 
either  by  legal  or  illegal  means,  whether  such  purpose  be  illegal 
at  common  law  or  by  statute,  or  to  effect  a  legal  purpose  by 
illegal  means,  whether  such  means  be  illegal  at  common  law 
or  by  statute,  is  a  common-law  conspiracy.  Such  combina- 
tions are  equally  illegal,  whether  they  promote  objects  or 
adopt  means  that  are  per  se  indictable,  or  promote  objects  or 
adopt  means  that  are  per  se  oppressive,  immoral,  or  wrong- 
fully prejudicial  to  the  rights  of  others.  .  .  .  The  anath- 
emas of  a  secret  organization  of  men,  combined  for  the  purpose 
of  controlling  the  industry  of  others  by  a  species  of  intimida- 
tion that  works  upon  the  mind  rather  than  the  body,  are  quite 
as  dangerous  as,  and  generally  altogether  more  effective  than, 
acts  of  actual  violence."  Page  568,  9  Atl.,  and  page  715,  59 
Am.  Rep.  In  Carew  v.  Rutherford,  106  Mass.  1,  10,  8  Am. 
Rep.  287,  Chapman,  J.,  after  giving  various  illustrations  of 
actionable  wrongs,  says:  ''But  as  new  methods  of  doing  in- 
jury to  others  are  invented  in  modern  times,  the  same  princi- 
ples must  be  applied  to  them,  in  order  that  peaceable  citizens 
may  be  protected  from  being  disturbed  in  the  enjoyment  of 
their  rights  and  privileges,  and  existing  forms  of  remedy  must 
be  used." 

In  Gatzow  v.  Buening  (Wis.;  1900)  81  N.  W.  1003,  49  L.  R. 
A.  475,  80  Am.  St.  Rep.  17,  it  was  held  that  damages  were 
recoverable.  It  is  true  that  a  contract  had  been  made,  but  the 
decision  was  not  put  upon  that  ground,  but  on  the  broader 
ground  that  the  conduct  of  the  defendants  constituted  an 
actionable  conspiracy.  Marshall,  J.,  said  (81  N.  W.  1007, 
49  L.  R.  A.  475,  80  Am.  St.  Rep.  17):  "This  is  an  age  of 
trusts  and  combinations  of  all  sorts.  There  is  clamor  against 
them  on  the  one  hand,  and  for  the  privilege  of  combining 
upon  the  other,  as  if  the  law  could  be  changed  to  fit  the 
opinions  and  selfish  ends  of  particular  classes.  There  is  clamor 
for  laws  to  prevent  combinations,  while  law  exists  that  con- 
demns most  of  them,  which  is  as  old  as  the  common  law  itself, 
and  sufficiently  severe  to  remedy  much  of  the  mischief  com- 
plained of  that  is  actual;  yet  violations  of  such  law  are  so 


THE  COMIMON  LAW  509 

common,  and  the  remedy  it  furnishes  so  seldom  applied,  that 
its  very  existence  seems  in  many  quarters  to  be  little  under- 
stood." In  Reg.  V.  Druitt,  10  Cox,  Cr.  Cas.  593,  it  was  held 
that  any  combination  of  persons  to  stifle  and  prevent  the  free 
use  of  labor  and  capital  within  legitimate  bounds  is  unlawful, 
and  that  the  law  furnishes  a  remedy  therefor.  The  liberty  of 
a  man 's  mind  and  will  to  say  how  he  shall  bestow  himself  and 
his  means,  his  talents  and  his  industry,  is  as  much  the  subject 
of  the  law's  protection  as  is  his  body.  A  combination  to  do 
an  act  tending  necessarily  to  oppress  the  public  or  oppress 
individuals,  by  unjustly  subjecting  them  to  the  power  of '  the 
confederates,  and  give  effect  to  the  purpose  of  the  latter, 
whether  of  extortion  or  mischief,  is  unlawful.  Bish.  Cr.  Law, 
§  177 ;  Destey,  Cr.  Law,  §  2 ;  Morris  Run  Coal  Co.  v.  Barclay 
Coal  Co.,  68  Pa.  173,  8  Am.  Rep.  159.  Every  agreement  be- 
tween two  or  more  persons  to  accomplish  a  criminal  or  unlaw- 
ful object,  or  a  lawful  object  by  criminal  or  unlawful  means, 
is  an  unlawful  conspiracy,  and  any  person  whose  rights  are 
injured  by  acts  done  in  furtherance  of  such  conspiracy  has 
his  action  at  law  for  redress  in  damages." 

In  Olive  v.  Van  Patten  (1894)  7  Tex.  Civ.  App.  630,  where 
a  petition  alleged  that  defendants,  who  were  lumber  dealers, 
had  formed  an  association  and  sought  to  prevent  sales  ^  by 
manufacturers  or  wholesale  dealers  to  any  person  not  a  dealer, 
except  a  railroad,  at  points  where  there  was  a  dealer;  that 
because  of  the  refusal  of  the  plaintiff,  a  sawmill  owner  and 
dealer,  who  was  not  a  member,  to  join  such  association,  and 
his  exercising  the  right  to  sell  to  others  than  dealers,  they  had 
maliciously  distributed  circulars  asking  that  patronage  be 
withdrawn  from  the  plaintiff  until  he  agreed  not  to  sell  to 
others  than  dealers,  thereby  influencing  others  not  to  deal 
with  plaintiff,  to  his  injury, — it  was  held  to  state  a  good  cause 
of  action  for  damages  and  injunction.  In  Barr  v.  Trades 
Council  (1896)  53  N.  J.  Eq.  101,  an  injunction  was  granted, 
and  an  able  opinion  filed  by  Green,  V.  C.  In  Jackson  v. 
Stanfield  (1894)  137  Ind.  592,  23  L.  R.  A.  588,  it  was  held 
that  a  combination  of  retail  lumber  dealers  to  destroy  the 
business  of  brokers  and  commission  dealers  Avho  did  not  keep 
a  lumber  yard  with  an  assorted  stock  of  lumber,  by  coercing 
wholesale  dealers  to  refuse  to  make  sales  to  such  brokers,  or 


510    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

lose  the  business  of  the  members  of  such  combination,  was 
unlawful,  and  rendered  a  member  who  procured  action  by 
the  association,  to  the  injury  of  brokers,  liable  to  the  latter 
in  damages;  also  that  an  injunction  might  be  granted  against 
enforcing  an  illegal  agreement  of  dealers  to  injure  the  busi- 
ness of  another  person.     See,  also,  Lucke  v.  Clothing  Cutters 
&  Trimmers  Assembly  (1893)  77  Md.  397,  19  L.  R.  A.  408,  39 
Am-.  St.  Rep.  421 ;  Code,  §  3807 ;  Witham  v.  Cohen,  100  Ga.  670. 
Courts  and  text  writers  have  not  infrequently  asserted  that, 
as  a  general  rule,  a  conspiracy  cannot  be  made  the  subject  of 
a  civil  action  unless  something  is  done  which,  without  the 
conspiracy,  would  give  a  right  of  action.     But  if  this  be  ad- 
vanced as  a  rule  of  universal  application,  it  does  not  stand 
unchallenged.     In  Bailey  v.  Association   (Tenn. ;  1899)   52  S. 
W.  853,  857,  46  L.  R.  A.  561,  it  is  said:     "It  is  entirely  true, 
as  in  effect  observed  in  McCauley  v.  Tierney,  19  R.  I.  255,  37 
L.  R.  A.  455,  61  Am.  St.  Rep.  770,  and  in  Manufacturing  Co.  v. 
Hollis,  54  Minn.  223,  21  L.  R.  A.  337,  40  Am.  St.  Rep.  319, 
that,  in  the  first  instance,  each  member  of  the  association  had 
a  perfect  legal  right  to  buy  material  and  supplies  exclusively 
from  any  dealer  or  dealers  he  might  choose,  and  each  dealer 
had  an  equal  right  to  select  members  for  his  customers,  and 
to  confine  his  sales  to  them  only.    These  were  inherent  rights, 
which  no  competitor  was  authorized  to  dispute,  no  court  em- 
powered to  control  or  curtail.    But  in  our  opinion,  it  does  not 
follow  from  this  undoubted  freedom  of  individual  member  and 
individual  dealer  that  all  of  the  members  may,  as  ruled  in 
those  cases,  lawfully  enter  into  a  general  and  unlimited  agree- 
ment, in  the  form  of  by-laws,  that  they  and  all  of  them  will 
make  their  purchases  from  only  such  dealers  as  will  sell  to 
members  exclusively.     The  premise  does  not  justify  the  con- 
clusion.    The  individual  right  is  radically  different  from  the 
combined  action.     The  combination  had  hurtful  powers  and 
infiuences  not  possessed  by  the  individual.     It  threatens  and 
impairs  rivalry  in  trade,  covets  control  in  prices,  seeks  and 
obtains  its  own  advancement  at  the  expense  and  in  the  oppres- 
sion of  the  public.    The  difference,  in  legal  contemplation,  be- 
tween individual  rights  and  combined  action  in  trade,  is  seen 
in  numerous  cases.     Any  one  of  several  commercial  firms  en- 
gaged in  the  sale  of  India  cotton  bagging  had  the  right  to 


THE  CO]\E\ION  LAW  511 

suspend  its  sale  for  any  time  it  saw  fit.  Yet  an  agreement 
between  all  of  them  to  make  no  sales  for  three  months  without 
the  consent  of  the  majority  'was  palpably  and  unequivocally 
a  combination  in  restraint  of  trade.'  Association  v.  Kock,  14 
La.  Ann.  168.  Any  one  of  several  companies  had  the  right  to 
sell  the  whole  or  only  a  part  of  its  output  to  only  such  persons, 
in  only  such  territory,  and  at  only  such  prices  as  it  pleased, 
yet  it  was  inimicable  [inimical]  to  the  interests  of  the  public, 
and  unlawful  for  them  to  combine  and  agree  that  those  matters 
should  be  determined  and  controlled  by  an  agency  jointly 
created  for  that  purpose.  Arnot  v.  Coal  Co.,  68  N,  Y.  558,  23 
Am.  Rep.  190;  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68 
Pa.  173,  8  Am.  Rep.  159.  The  same  was  held  to  be  true  as  to 
the  individual  company  and  the  combined  company,  respect- 
ively, in  the  Sugar  Trust  Case  (Cir.  Ct.)  3  N.  Y.  Supp.  401,  and 
(Sup.).  So  one  railroad  company  has  the  unquestioned  right 
to  charge  reasonable  rates  for  transportation,  but  it  is  not 
lawful  for  competing  companies  to  mutually  bind  themselves 
to  maintain  those  rates.  U.  S.  v.  Trans-Missouri  Freight  Ass'n, 
166  U.  S.  290,  41  L.  Ed.  1007;  U.  S.  v.  Joint  Traffic  Ass'n,  171 
U.  S.  505,  43  Li.  Ed.  259.  Individual  boat  proprietors  may 
establish  rules  and  rates  for  the  conduct  of  their  separate 
business,  but  the  law  does  not  allow  them  to  form  a  combina- 
tion, and  by  mutual  agreement  establish  joint  rules  and  rates. 
Hooker  v.  Vandewater,  4  Denio  349,  47  Am.  Dec.  258 ;  Stanton 
V.  Allen,  5  Denio  434,  49  Am.  Dec.  282.  One  grain  dealer  is 
perfectly  free  to  decide  for  himself  what  price  he  will  offer 
for  grain,  but  he  is  not  allowed  to  enter  into  an  agreement 
with  the  other  grain  dealers  of  his  town,  and  thereby  fix  the 
price  that  all  of  them  shall  offer.  Craft  v.  McConoughy,  79 
111.  346,  22  Am.  Rep.  171.  A  single  brewer  may  fix  his  own 
price  for  the  beer  he  sells.  Nevertheless  it  is  unlawful  for  an 
association  of  brewers  to  regulate  the  sales  of  its  members. 
Nester  v.  Brewing  Co.,  161  Pa.  473,  24  L.  R.  A.  247,  41  Am.  St. 
Rep.  894.  Many  other  eases  to  the  same  effect  in  principle 
might  easily  be  cited,  were  their  citation  deemed  at  all  neces- 
sary. ' ' 

Unquestionably,  any  person  who  does  not  occupy  a  public 
or  quasi  public  position,  like  public  officials,  railroad  com- 
panies,  etc.,   or  whose   property   has   not   become   impressed 


512    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

with  any  public  or  quasi  public  use  (Munn  v.  Illinois  [1876] 
94  U.  S.  113,  24  L.  Ed.  77),  may  ordinarily  deal  with  any 
other  person  at  his  option.  It  may  also  be  conceded,  at  least 
for  the  sake  of  the  argument,  that  ordinarily  a  number  of 
persons  may,  in  concert,  decline  to  sell  or  to  buy  from  another. 
Yet  the  facts  of  the  present  case  go  much  further  than  that. 
Here  there  was  a  combination  not  merely  agreeing  not  to  deal 
with  the  plaintiff,  but  undertaking  also  to  drive  off  and  pre- 
vent others  from  dealing  with  it,  and  seeking  to  ruin  its  busi- 
ness by  destroying  its  power  to  purchase  goods  unless  it 
should  submit  to  regulate  its  business  or  fix  its  prices  as  they 
desired.  If  the  defendants,  as  individuals,  or  in  any  way, 
claim  to  have  the  right  to  fix  the  prices  at  which  they  will  sell, 
how  can  they  claim  that  plaintiff  has  no  such  right  as  to  its 
own  business?  In  Boutwell  v.  Marr,  supra,  the  supreme  court 
of  Vermont  said  that  the  view  above  referred  to  "would  pre- 
clude a  reliance  upon  an  unlawful  purpose,  and  require  that 
the  means  used  should  be  illegal.  The  agreeing  together  to 
effect  an  illegal  purpose  being  itself  illegal,  it  might  seem 
that  any  act  done  in  furtherance  of  the  agreement,  and  result- 
ing in  damage,  even  though  itself  not  a  violation  of  right, 
would  sustain  a  recovery.  .  .  .  If  it  be  true,  as  a  gen- 
eral proposition,  that  several  may  lawfully  unite  in  doing  to 
another's  injury,  even  for  the  accomplishment  of  an  unlawful 
purpose,  whatever  each  has  a  right  to  do  individually,  it  by 
no  means  follows  that  the  combination  may  not  be  so  brought 
about  as  to  make  its  united  action  an  unlawful  means."  See, 
also,  Barr  v.  Trades  Council,  supra;  the  strong  opinion  of 
Gibson,  C.  J.,  in  Com.  v.  Carlisle,  Brightly,  N.  P.  36,  41, 
quoted  at  some  length  in  one  of  the  opinions  in  Knight's  Case, 
156  U.  S.  35,  39  L.  Ed.  325 ;  State  v.  Geidden,  55  Conn.  46,  75, 
3  Am.  St.  Rep.  23;  and  cases  cited  in  1  Eddy,  Comb'ns,  §  360. 
Certain  portions  of  the  annual  address  (in  1899)  of  the 
president  of  the  National  Association  of  Retail  Druggists,  as 
published  in  the  American  Druggist  and  Pharmaceutical  Rec- 
ord, were  introduced  in  evidence,  from  which  it  appears  that, 
in  discussing  the  power  of  combination  as  compared  with  in- 
dividual effort,  he  said:  "Nature,  too,  forgets  the  individual 
always.  To  the  species  alone  is  it  kind.  In  the  general  up- 
lifting alone  does  it  glory.    So  must  it  be  with  man.     Man  is 


THE  COREVION  LAW  513 

of  nature,  and  must  follow  nature's  bent.  This  tendency  to 
associate,  to  unite,  to  combine,  everywhere  present,  strangely 
active,  is  as  resistless  as  is  yonder  great  Niagara.  Attempt  to 
oppose  it,  and  it  spreads  far  and  wide, — spreads  with  the 
opposing  force,  all  the  while  accumulating  power,  until  every- 
thing, even  the  mightiest,  is  swept  before  its  immensity."  And 
yet,  when  such  mighty  power,  like  a  torrent,  is  turned  upon 
an  individual  who  declines  to  join  or  to  do  the  bidding  of 
those  who  direct  the  force  and  sell  at  prices  dictated  by  them, 
for  the  purpose  of  crushing  him  and  driving  off  those  who 
would  deal  with  him,  under  the  threat  that  otherwise  they  will 
also  be  drowned  in  the  resistless  Niagara,  shall  courts  of  justice 
find  no  remedy?  To  protect  the  individual  against  encroach- 
ments upon  his  rights  by  greater  power  is  one  of  the  most 
sacred  duties  of  courts.  If  there  is  any  analogy  between  a 
combination  of  druggists  to  raise  and  maintain  prices,  and  a 
biological  species,  the  Darwinian  theory  is  hardly  a  rule  ior  a 
court  in  administering  equity. 

In  contrast  with  this  idea,  the  following  vigorous  language 
of  Mr.  Justice  Br.vdley  in  the  Slaughter  House  Cases,  16 
Wall.  116,  21  L.  Ed.  394,  may  be  quoted:  "For  the  liberty, 
preservation,  exercise,  and  enjojrment  of  these  rights  [life, 
liberty,  and  the  pursuit  of  happiness],  the  individual  citizen, 
as  a  necessity,  must  be  left  free  to  adopt  such  calling,  profes- 
sion, or  trade  as  may  seem  to  him  most  conducive  to  that  end. 
Without  this  right  he  cannot  be  a  freeman.  This  right  to 
choose  one's  calling  is  an  essential  part  of  that  liberty  which 
it  is  the  object  of  the  government  to  protect,  and  a  calling, 
when  chosen,  is  a  man's  property  and  right.  Liberty  and 
property  are  not  protected  where  these  rights  are  arbitrarily 
assailed."  This  occurs  in  a  dissenting  opinion,  it  is  true;  but 
there  was  no  difference  among  the  members  of  the  court  as  to 
the  fact  that  a  man's  business  is  his  property,  the  difference 
being  as  to  the  application  of  certain  amendments  of  the  con- 
stitution of  the  United  States. 

It  is  generally  held  that,  if  the  injury  is  malicious,  the  per- 
son injured  has  a  right  of  action.  Indeed,  it  may  be  said  that 
malicious  injury  to  the  business  of  another  has  long  been  held 
actionable.  See  Barr  v.  Trades  Council,  53  N.  J.  Eq.  115,  116, 
and  citations.    In  the  case  of  Steamship  Co.  v.  McGregor,  23 

Kjles  B.  of  T.  Vol.  1—38 


514    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Q.  B.  Div.  608, — a  case  which  will  be  referred  to  more  fully 
presently, — Lord  Justice  Bowen  said:  "Now,  intentioniilly 
to  do  that  which  is  calculated  in  the  ordinary  course  of  events 
to  damage,  and  which  does  in  fact  damage,  another  in  that 
other  person's  property  or  trade,  is  actionable,  if  done  with- 
out just  cause  or  excuse.  Such  intentional  action,  when  done 
without  just  cause  or  excuse,  is  what  the  law  calls  a  'malicious 
wrong.'  "  The  decision  in  Barr  v.  Trades  Council,  supra, 
after  citing  this  and  other  cases,  proceeds:  "When  we  speak 
in  this  connection  of  an  act  done  with  a  malicious  motive,  it 
does  not  necessarily  imply  that  the  defendants  were  actuated 
in  their  proceedings  by  spite  or  malice  against  the  complain- 
ant, Mr.  Barr,  in  the  sense  that  their  motive  was  to  injure  him 
personally,  but  that  they  desired  to  injure  him  in  his  business 
in  order  to  force  him  not  to  do  what  he  had  a  perfect  right 
to  do.  ...  If  the  injury  which  has  been  sustained  or 
which  is  threatened  is  not  only  the  natural  but  the  inevitable 
consequence  of  the  defendants'  acts,  it  is  without  effect  for 
them  to  disclaim  the  intention  to  injure.  It  is  folly  for  a  man 
who  deliberately  thrusts  a  firebrand  into  a  rick  of  hay  to  de- 
clare, after  it  has  been  destroyed,  that  he  did  not  intend  to 
burn  it.  .  .  .  The  law,  as  a  rule,  presumes  that  a  person 
intends  the  natural  result  of  his  acts,  and  this  is  true  with 
reference  to  civil  as  well  as  criminal  acts."  Courts  will  look 
at  the  real  substance  of  things,  and  do  not  stop  at  the  mere 
form  of  words  that  may  be  employed.  See  More  v.  Bennett 
(111.)  29  N.  E.  88,  15  L.  R.  A.  361,  33  Am.  St.  Rep.  216. 

We  wiU  now  refer  to  some  authorities  cited  by  defendants. 
A  leading  case,  in  modem  times,  is  the  English  case  of  Steam- 
ship Co.  V.  McGregor,  supra.  It  may  not  be  amiss  to  give 
briefly  its  history.  It  was  first  heard  on  application  for  in- 
junction before  Lord  Chief  Justice  Coleridge  and  Lord  Jus- 
tice Fry  in  1885.  They  held  that  a  confederation  or  con- 
spiracy by  an  association  of  shipowners  which  was  calculated 
to  have,  and  had,  the  effect  of  driving  the  ships  of  other 
merchants  or  owners,  and  those  of  plaintiffs  in  particular,  out 
of  a  certain  line  of  trade,  even  though  the  immediate  and 
avowed  objects  were  not  to  injure  the  plaintiffs,  but  to  secure 
to  the  conspirators  themselves  a  monopoly  of  the  carrying 
trade  between  certain  foreign  ports  and  England,   was,   or 


THE  COaOION  LAW  515 

might  be,  au  indictable  offense,  and  therefore  actionable,  if 
private  and  particular  damage  could  be  shown.  But  under 
the  facts  disclosed  on  that  hearing,  injunction  ad  interim  was 
denied.  15  Q.  B.  Div.  476.  The  case  was  afterwards  heard 
by  Lord  Chief  Justice  Coleridge  without  a  jury,  and  he 
rendered  judgment  for  the  defendants,  holding  that  the  evi- 
dence failed  to  show  an  actionable  conspiracy,  as  alleged,  and 
that  it  showed  only  sharp  competition  in  business,  including 
holding  out  inducements  by  rebates,  advantages,  etc.,  to  those 
who  would  deal  with  defendants  exclusively.  (1888)  21  Q.  B. 
Div.  544.  He  stated,  however,  that  he  had  long  doubted  and 
hesitated  in  reaching  this  conclusion.  In  the  court  of  appeal, 
the  case  was  heard  before  Lord  Esher,  master  of  the  rolls, 
and  Bowen  and  Fry,  L.  JJ.  Lord  Esher  was  of  opinion 
that  the  appeal  should  be  allowed,  but  was  overruled  by  the 
other  two  justices.  (1889)  23  Q.  B.  Div.  598,  601.  In  the 
course  of  the  opinion  of  Fry,  L.  J.,  which  has  been  frequently 
cited  in  other  cases,  he  says:  "The  ancient  common  law  of 
this  country,  and  the  statutes  with  reference  to  the  acts  known 
as  'badgering,'  'forestalling,'  'regrating,'  and  'engrossing,' 
indicated  the  mind  of  the  legislature  and  of  the  judges  that 
certain  large  operations  in  goods  which  interfered  with  the 
more  ordinary  course  of  trade  were  injurious  to  the  public. 
They  were  held  criminal  accordingly.  But  early  in  the  reign 
of  George  III  the  mind  of  the  legislature  showed  symptoms 
of  change  in  this  matter,  and  the  penal  statutes  were  repealed 
(12  Geo.  Ill,  c.  71),  and  the  common  law  was  left  to  its  un- 
aided operations.  This  repealing  statute  contains  in  the  pre- 
amble the  statement  that  it  had  been  found  by  experience  that 
the  restraint  laid  by  several  statutes  upon  dealing  in  corn, 
meal,  flour,  cattle,  and  sundry  other  sorts  of  victuals,  by  pre- 
venting a  free  trade  in  the  commodities,  had  a  tendency  to 
discourage  the  growth  and  enhance  the  price  of  the  same.  This 
statement  is  very  noteworthy.  It  contains  a  confession  of 
failure  in  the  past ;  the  indication  of  a  new  policy  for  the 
future.  This  new  policy  has  been  more  clearly  declared  and 
acted  upon  in  the  present  reign;  for  the  legislature  has,  by  7 
&  8  Vict,  c.  24,  altered  the  common  law  by  utterly  abolishing 
the  several  offenses  of  badgering,  forestalling,  and  regrating." 
He  also  says  a  reference  to  the  statutes  of  1871  and  1875,  en- 


516    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

larging  the  power  of  combination  among  workmen  and  mas- 
ters, is  indicative  of  public  policy  in  England  at  the  time  of 
the  decision.  We  will  presently  compare  this  with  the  public 
policy  of  this  state.  The  majority  of  the  court  of  appeal  found, 
as  matter  of  fact,  that  the  defendants  were  not  engaged  in  a 
conspiracy  or  unlawful  combination,  and  were  not  actuated 
by  malice  or  ill  will  toward  plaintiff,  and  did  not  aim  at  any 
general  injury  to  plaintiff's  trade, — the  object  being  simply 
to  divert  the  trade  from  plaintiff  to  defendants, — and  that 
the  damage  to  be  inflicted  was  to  be  strictly  limited  by  the 
gain  which  defendants  desired  to  win  for  themselves ;  in  other 
words,  that  it  was  a  case  of  competition  only.  Of  course,  the 
loss  which  a  rival  may  suft'er  from  legitimate  competition  does 
not  give  a  right  of  action.  The  case  was  carried  to  the  house 
of  lords,  and  the  judgment  of  the  majority  was  affirmed. 
(1892)  61  Law  J.  Q.  B.  295;  (1892)  App.  Gas.  25.  Very  full 
extracts  from  these  decisions  are  made  in  1  Eddy,  Comb'ns, 
§  249.  A  careful  consideration  of  the  various  decisions  in 
this  case  will  show  that,  in  substance,  it  only  held  that  where 
competition  was  lawful,  even  if  sharp,  and  the  acts  com- 
plained of  were  adopted  for  the  advancement  of  the  de- 
fendants' own  trade,  there  was  no  actionable  conspiracy, 
although  plaintiff  may  have  sustained  loss  thereby.  If  this 
decision  should  be  deemed  adverse  to  the  views  here  presented,  it 
may  be  well  to  contrast  the  public  policy  of  this  state  with  that 
mentioned  by  Pry,  L.  J,  Engrossing,  forestalling,  and  regrating 
still  stand  in  our  Code  as  criminal  offenses,  and  the  presiding 
judge  is  required  to  give  the  law  in  reference  to  these  offenses 
specially  in  charge  to  the  grand  jury  at  each  term  of  court.  See 
Pen,  Code,  §  §  662,  846,  Our  state  constitution  declares,  that  the 
legislature  "shaU  have  no  power  to  authorize  any  corpora- 
tion ...  to  make  any  contract,  or  agreement  what- 
ever, with  any  such  corporation  [i.  e.,  other  corporations], 
which  may  have  the  effect,  or  be  intended  to  have  the  effect 
to  defeat  or  lessen  competition  in  their  respective  businesses 
or  to  encourage  monopoly;  and  all  such  contracts  and  agree- 
ments shall  be  illegal  and  void,"  Code,  §  5800.  See  Railroad 
Co.  V,  CoUins,  40  Ga.  583(6),  629;  Western  Union  Tel.  Co.  v. 
American  Union  Tel.  Co.,  65  Ga.  160,  38  Am.  Rep.  781 ;  City 
of  Atlanta  v.  Stein,  111  Ga.  789,  51  L.  R.  A.  335.    What  was 


THE  COMMON  LAW  517 

said  arguendo  in  State  v.  Central  of  Georgia  Rjr.  Co.,  109  Ga. 
722,  48  L.  R.  A.  351,  to  the  effect  that  all  combinations  are 
not  necessarily  illegal,  has  no  application  to  the  facts  of  the 
present  case.  As  has  been  shown  above,  in  the  light  of  the 
evidence,  it  is  futile  for  these  defendants  to  claim  that  they 
were  merely  resisting  an  attack  on  the  part  of  the  plaintiff. 

The  following  are  some  of  the  cases  relied  on  by  the  de- 
fendants:    Herriman  v.  Menzies  (1896)   115  Cal.  16,  44  Pac. 
660,  35  L.  R.  A.  318,  56  Am.  St.  Rep.  81,  arose  on  an  action 
to  enforce  an  accounting  under  an  agreement  for  the  forma- 
tion of  an  association  for  doing  the  business  of  stevedores.    It 
was  held  not  to  be  illegal,  though  one  provision  included  the 
fixing  of  prices  to  be  charged  by  the  members.     There  Was 
no  effort  to  force  others  to  charge  such  prices;  and  it  was 
said  in  the  decision  that  there  was  nothing  to  show  that  the 
members  comprised  more  than   an  insignificant  part  of  the 
trade,  in  numbers  or  volume  of  business,  or  any  such  restric- 
tion "as  to  preclude  fair  competition  with  others  engaged  in 
the  business."     Bowen  v.  Matheson,   14  Allen,  499,   will  be 
found  to  have  been  decided  on  the  idea  of  competition;  but 
it  is  not  a  well-considered  case,  reviews  none  of  the  authori- 
ties   (but  one   being  cited),   and  decides  only  as   to   certain 
allegations  on  demurrer.    It  has  been  criticised  by  Mr.  Eddy, 
whose  book  shows  that  he  approached  the  subject  without 
any   prejudice    against    combinations.      1    Eddy,    Comb'ns,    § 
571.    Mr.  Freeman,  in  his  note  to  Harding  v.  Glucose  Co.  (111. 
Sup.)  74  Am.  St.  Rep.  244  (s.  c),  says:    "Massachusetts  seems 
also  to  have  gone  astray  on  the  question  of  illegal  combina- 
tions,    .     .     .     having    confused     the     doctrine     relating     to 
contracts  in  restraint  of  trade  and  tlie  doctrine  against  re- 
strictions upon  competition."    Printing  Co.  v.  Howell  (1894). 
26  Or.  527,  28  L.  R.  A.  464,  46  Am.  St.  Rep.  640,  might  be 
quoted  as  an   authority  for  the   plaintiff,   except   as   to   the 
necessity  for  injunction.     The  court  says  (38  Pac.  553,  28  L. 
R.  A.  474)  :     "While  conspiracy  in  itself  is  not  an  indictable 
offense  under  our  law,  all  these  authorities  show  conclusively 
that  such  a  combination  for  the  purpose  of  doing  injury  to 
the  public  or  to  individuals  is  per  se  wrongful.     Civil  conse- 
quences are  not  changed  by  reason  of  the  fact  that  the  com- 
bination is  not  made  a  statutory  offense."     When  the  court 


518    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

came  to  consider  the  question  of  the  necessity  shown  for  an 
injunction  (there  having  been  a  demurrer),  it  said  (page  555, 
38  Pac,  and  page  475,  28  L.  R.  A.)  that,  "although  it  might 
be  inferred  that  a  boycott  was  pending,  they  [certain  notices] 
were  not  so  positive  nor  so  persistently  and  wickedly  repeated 
and  maintained  as  to  authorize  an  injunction;"  and  again 
(page  556,  38  Pac,  and  page  476,  28  L.  R.  A.),  ''There  is  no 
such  persistent,  aggressive,  and  virulent  boycott  noAv  in  prog- 
ress," etc.  It  would  seem  to  be  rather  too  stringent  to  limit 
equity  jurisdiction  by  so  many  adjectives.  But  in  the  present 
case  the  injury  is  in  progress,  and  is  still  threatened.  Mc- 
Cauley  v.  Tierney  (R.  I.  1895)  33  Atl.  1,  37  L.  R.  A.  455,  61 
Am.  St.  Rep.  770,  is  another  ease  relied  on  by  defendants.  If 
this  decision  is  sound,  it  can  only  be  on  the  idea  that  the 
defendants  were  seeking  to  obtain  trade  for  themselves  by 
saying,  in  effect:  "If  you  deal  with  us,  we  will  deal  with 
you.  If  you  deal  with  others,  we  will  withdraw  our  patron- 
age." Whether  such  an  agreement  was  legally  enforceable 
need  not  be  discussed.  There  was  no  effort  to  compel  or  coerce 
others  not  members  to  be  bound  by  their  prices  or  views.  If 
the  decision  in  Manufacturing  Co.  v.  HoUis,  54  Minn.  223,  55 
N.  W.  1119,  21  L.  R.  A.  337,  40  Am.  St.  Rep.  319,  can  be 
sustained,  it  must  be  on  the  same  idea.  No  compulsory  meas- 
ures seem  to  have  been  used  to  enforce  obedience  on  mem- 
bers; nor  does  there  appear  to  have  been  any  effort  to  drive 
away  from  plaintiff  others  than  those  voluntarily  acting  to- 
gether in  concert,  and  no  pressure  on  outsiders  to  maintain 
prices  or  incur  ruin.  In  truth,  however,  some  of  what  was 
said  in  that  decision  is  unsound,  and  not  in  accord  with  cases 
already  cited.  It  has  been  considerably  criticised.  See  Bailey 
v.  Association  (Tenn.;  1899)  52  S.  W.  857,  46  K  R.  A.  561;  1 
Eddy,  Comb'ns,  §  560,  p.  476,  note;  Jackson  v.  Stanfield  (Ind. ; 
1894)  36  N.  E.  345,  37  N.  E.  14,  23  L.  R.  A.  596.  Cote  v. 
Murphy  (Pa. ;  1894)  28  Atl.  191,  23  L.  R.  A.  135,  39  Am.  St. 
Rep.  686,  and  Buchanan  v.  Kerr,  following  it  (page  195,  28 
Atl.),  held  that  where  employes  had  entered  into  a  combina- 
tion to  control  by  artificial  means  the  supply  of  labor,  pre- 
paratory to  a  demand  for  an  advance  in  wages,  a  combination 
of  employers  to  resist  such  artificial  advance  is  not  unlawful, 
since  it  is  not  made  to  lower  the  price  of  labor  as  regulated 


THE  COMMON  LAW  519 

by  supply  and  demand.  Certain  Pennsylvania  statutes  were 
also  considered  as  indicative  of  public  policy  on  the  line  of 
combining  to  meet  combinations.  The  strong  statement  of 
Gibson,  J.,  in  regard  to  conspiracies  (Com.  v.  Carlisle,  Brightly, 
N.  P.  40),  is  cited  with  approval. 

In  Payne  v.  Railroad  Co.  (Tenn.;  1884)  13  Lea,  507,  49 
Am.  Rep.  666,  there  was  no  question  of  combination  or  con- 
spiracy at  all;  and  the  supreme  court  of  the  same  state  ren- 
dered the  decision  in  the  later  case  of  Bailey  v.  Association, 
already  referred  to.  Park  &  Sons  Co.  v.  National  Wholesale 
Druggists'  Ass'n,  supra  (supreme  court  of  New  York,  1900) 
is  cited.  We  must  leave  to  the  honorable  courts  of  that  state 
to  reconcile  that  decision  with  the  principle  ruled  in  Park  & 
Sons  Co.  V.  National  Wholesale  Druggists'  Ass'n  (Sup.)  50 
N.  Y,  Supp.  1064,  where,  as  quoted  in  1  Eddy,  Comb'ns,  § 
380,  p.  213,  it  was  held:  "It  is  in  restraint  of  trade  and 
unlawful  for  a  manufacturer  to  become  a  party  to  a  com- 
bination which  shall  prevent  any  of  his  customers  from  ob- 
taining other  goods  of  other  manufacturers  because  those 
customers  violate  the  agreement  with  him  in  respect  to  the 
cutting  of  prices;"  and  also  with  People  v.  Sheldon,  supra. 
It  seems,  too,  that  in  some  cases  in  New  York  and  elsewhere 
an  idea  has  arisen  of  determining  how  much  competition  is 
desirable,  and  apparently  of  holding  that  extreme  compe- 
tition is  undesirable,  and  a  combination  to  meet  it  is  not  un- 
lawful. The  fallacy  of  such  a  standard  is  clearly  shown  by 
Judge  Taft  in  U.  S.  v.  Addystone  Pipe  &  Steel  Co.,  supra, 
and  by  Mr.  Freeman  in  his  note  to  Harding  v.  Glucose  Co., 
supra.  Brewster  v.  Miller  (Ky.;  1897)  41  S.  W.  301,  38 
L.  R.  A.  505,  held  that  an  association  of  undertakers  might 
lawfully  agree  to  decline  to  render  service  in  their  business 
to  one  who  had  refused  to  pay  a  bill  to  some  member  of  the 
association  for  similar  services  previously  rendered.  Here, 
also,  there  was  no  effort  to  compel  persons  not  members  to 
uphold  the  prices  or  obey  the  dictates  of  the  association,  or 
to  coerce  members  or  others,  but  only  a  voluntary,  united 
refusal  to  serve  a  person  who  would  not  pay  for  similar  serv- 
ices. Continental  Ins.  Co.  v.  Board  of  Fire  Underwriters  of 
the  Pacific  (C.  C.)  67  Fed.  310,  sought  to  follow  the  decision 
in  the  Mogul  Steamship  Case,  and  held  that  the  said  acts 


520    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

there  complained  of  were  for  the  purpose  of  competition,  and 
not  maliciously  done.  Here,  again,  there  was  no  effort  to 
drive  out  of  business  companies  not  members,  further  than 
nonintercourse,  and  not  having  the  same  agents.  So  far  as 
the  enforcing  of  these  provisions  by  a  penalty  is  concerned, 
the  decision  is  in  conflict  with  Boutwell  v.  Marr,  supra. 

Finally,  was  the  plaintiff  entitled  to  an  injunction?  The 
usual  grounds  for  the  grant  of  an  injunction  in  such  cases 
are  (1)  an  injury  which  threatens  irreparable  damage;  or  (2) 
a  continuing  injury,  when  the  legal  remedy  therefor  may 
involve  a  multiplicity  of  suits.  "The  difficulty  of  satisfac- 
torily estimating  damages  to  business  is  frequently  recognized 
in  applying  those  principles  to  suits  relating  to  good  will, 
trade-marks,  patent  rights,  and  copyrights,  3  Pom.  Eq.  Jur. 
§§  1352,  1354."  Barr  v.  Trades  Council,  53  N.  J.  Eq.  126, 
et  seq.,  and  authorities  cited.  Mr.  Eddy  says:  "An  injury 
is  irreparable  when  the  damage  cannot  be  measured  by  any 
known  pecuniary  standard.  The  destruction  of,  or  even  injury 
to,  a  growing  business,  cannot  very  well  be  measured  in 
damages,  since  it  is  difficult,  if  not  impossible,  to  lay  down  any 
rule  whereby  a  jury  can  definitely  ascertain  the  damages  in- 
flicted. The  owner  of  the  business  himself  probably  could 
not  estimate  his  loss,  and  yet  the  loss  would  be  beyond  dis- 
pute." Citing  authorities.  2  Eddy,  Comb 'us,  §§  1014,  1024, 
1026,  pp.  1161,  1169, 1170 ;  Blindell  v.  Hagan  (C.  C.)  54  Fed.  40, 
affirmed  on  appeal  in  56  Fed.  696.  Several  of  the  cases  already 
cited  arose  upon  applications  for  injunction,  and  apply  to  this 
feature  of  the  case. 

It  is  urged  that  the  plaintiff  was  not  entitled  to  equitable 
relief,  because  it  did  not  come  into  a  court  of  equity  "with 
clean  hands."  The  specific  claim  of  uncleanness  is  that  on 
some  occasions  it  sold  one  drug  or  mixture  instead  of,  or  pur- 
porting to  be,  another.  This  is  denied.  If  it  were  true,  it 
would  be  no  defense  to  this  case.  If  it  is  undertaken  to  coerce 
a  dealer  not  to  sell  at  reduced  prices,  and  is  sought  unlaw- 
fully to  destroy  its  business  if  it  does  so,  an  applicatiion  by  it 
for  injunction  is  not  successfully  met  by  saying  that  it  sold 
some  spurious  goods,  or  misrepresented  some  to  customers  in 
certain  sales.  It  was  money,  not  morals,  that  moved  the  de- 
fendants in  their  conduct  toward  it  for  cutting  prices.     The 


THE  COIVOION  LAW  521 

doctrine  that  a  suitor  must  enter  a  court  of  equity  "with 
clean  hands"  has  reference  to  the  transaction  complained  of 
by  him.  Ansley  v.  Wilson,  50  Ga.  425.  If  plaintiff  sells  adul- 
terated drugs,  it  and  its  officers  are  liable  to  punishment  under 
the  criminal  law.    Pen.  Code,  §§  483,  484. 

The  learned  judge  did  not  err  in  holding  that  the  defend- 
ants who  are  members  of  the  Atlanta  Druggists'  Association, 
in  the  name  of  such  association  or  otherwise,  should  be  en- 
joined from  sending  out  to  wholesale  druggists  or  proprietors 
of  proprietary  medicines,  through  the  mails,  or  delivering 
them  to  them  otherwise,  the  letter  and  agreement  set  out  in 
Exhibits  A  and  B  to  plaintiff's  petition,  or  seeking  to  cause 
the  latter  to  be  signed  by  means  of  the  letter  set  out  in 
Exhibit  A,  or  other  like  means,  or  sending  out  any  letter, 
circular,  or  agreement  of  similar  character,  purpose,  directly 
or  indirectly,  to  wholesalers,  jobbers,  or  proprietors;  and 
from  issuing  to  salesmen,  and  causing  to  be  signed,  the  card 
agreement  attached  to  tlie  petition  as  Exhibit  C,  or  any  card 
or  agreement  of  similar  import  or  purpose ;  and  from  in  any 
manner  threatening  or  seeking  to  intimidate  wholesalers  or 
proprietors,  and  so  prevent  them  from  selling  to  plaintiff,  as 
a  cutter  or  aggressive  cutter;  and  from  conspiring  and  from 
seeking  to  prevent  wholesale  or  other  druggists  from  dealing 
with  or  selling  to  plaintiff  by  direct  or  indirect  threats  of 
cutting  off  their  means  of  obtaining  goods  or  merchandise,  or 
of  causing  such  means  to  be  cut  off,  or  of  causing  them 
injury  or  loss  of  custom  if  they  should  deal  with  or  supply 
the  plaintiff;  and  from  taking  part  in  or  carrying  out  any 
conspiracy  or  combination  for  that  purpose;  and  from  desig- 
nating or  pointing  out  the  plaintiff  to  other  druggists'  asso- 
ciations or  their  representatives  as  an  aggressive  cutter;  and 
from  writing  or  sending  through  the  mails  any  card,  circular, 
letter,  or  other  written  or  printed  communication  conveying 
or  intended  to  convey  to  proprietors  or  wholesalers  through- 
out the  United  States  that  plaintiff  is  an  aggressive  cutter, 
and  under  the  ban  of  the  local  organization,  or  of  similar 
import. 

[The  next  paragraph  of  the  opinion  holding  unconstitu- 
tional the  Georgia  anti-trust  act  (Acts,  1896,  p.  68)  is  omit- 
ted.] 


522    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

3.  Certain  assignments  of  error  in  the  bill  of  exceptions 
complain,  in  effect,  that  the  injunction  was  too  broad,  be- 
cause it  was  operative  upon  the  individual  members  of  the 
association  to  which  the  defendants  belonged,  and  therefore 
had  the  effect  of  cutting  them  off  from  the  exercise  of  in- 
dividual rights  which  it  was  their  privilege  to  exercise,  pro- 
vided there  was  no  unlawful  conspiracy.  The  reply  to  this  is 
that  the  judge  found  there  was  a  conspiracy.  He  could  not 
enjoin  the  combination  in  the  abstract,  but,  to  render  any 
effective  protection  to  the  plaintiff,  was  obliged  to  enjoin  the 
individual  members  of  the  association  from  doing  the  un- 
lawful acts  which  they  had  conspired  to  do,  and  were  actually 
doing  when  the  petition  was  filed.  It  was  the  only  possible 
way  in  which  to  make  the  writ  of  injunction  of  any  avail. 
The  defendants  could  not,  fresh  from  the  conspiracy,  and 
inspired  by  the  purposes  thereof,  fail  to  injure  the  plaintiff, 
if  allowed  to  continue  their  unlawful  acts  under  the  guise  of 
doing  so  upon  their  individual  responsibility. 

Judgment  affirmed,  with  direction.  All  the  justices  con- 
curring, except  Lewis,  J.,  absent."^ 


NATIONAL  FIREPROOFING  CO.  v.  MASON  BUILDERS' 
ASSOCIATION 

(United  States  Circuit  Court  of  Appeals,  Second  Circuit. 
169  Fed.  259.) 

This  is  an  appeal  from  a  decree  of  the  Circuit  Court  for  the 
Southern  District  of  New  York  dismissing  a  bill  of  complaint 
in  a  suit  in  equity. 

The  complainant  is  a  corporation  under  the  laws  of  the 
state  of  Pennsylvania  and  is  authorized  by  its  charter  to 
manufacture  and  install  fireproofing.  Since  its  organization 
it  has  been  engaged  almost  exclusively  in  the  manufacture 

76 — See  also  Employing  Printers  member  of  the  printers'  association 

Club    V.    Blosser    Co.,    122    Ga.    509  and   abide  by   the  rules  of   the  as- 

(lockout  of  labor  by  printers'  asso-  sociation,     which     eliminated     com- 

eiation  unless  labor  refused  to  work  petition  and  fixed  prices), 
for  printer  who  would  not  become  a 


THE  COM^ION  LAW  523 

and  installation  of  what  is  known  as  hollow  tile  fireproofing 
and  produces  over  50  per  cent,  of  the  entire  output  of  that 
article  in  the  United  States. 

The  defendant  Mason  Builders'  Association  is  a  corporation 
under  the  laws  of  the  state  of  New  York,  composed  of  master 
mason  builders  doing  business  in  the  city  of  New  York,  but 
comprising  less  than  a  majority  of  the  mason  builders  of  that 
city. 

The  defendants  the  various  Bricklayers'  Unions,  with  four 
exceptions  which  are  chartered,  are  unincorporated  associa- 
tions. Practically  every  bricklayer  in  the  city  of  New  York 
and  Long  Island  is  a  member  of  one  of  these  unions. 

The  object  of  this  suit  is  to  restrain  the  enforcement  of,  and 
to  have  declared  void,  an  agreement  entered  into  between  the 
Mason  Builders'  Association  and  the  Bricklayers'  Unions, 
upon  the  ground  that  it  unlawfully  interferes  with  the  busi- 
ness and  property  of  the  complainant. 

The  agreement  in  question  between  the  Mason  Builders' 
Association  and  the  Bricklayers'  Unions  is  a  biennial  trade 
agreement  covering  the  years  1906  and  1907  and  relating  to 
rates  of  wages,  hours  of  labor,  the  settlement  of  differences 
by  arbitration,  and  many  other  matters  in  the  building  trade 
affecting  the  interests  of  the  parties.  The  particular  clauses 
to  which  the  complainant  objects  are  the  following: 

"  (5)  The  members  of  the  Mason  Builders'  Association  must 
include  in  their  contracts  for  building  all  cutting  of  masonry, 
interior  brickwork,  the  paving  of  brick  floors,  the  installing 
of  concrete  blocks,  the  brickwork  of  the  damp-proofing  sys- 
tem and  all  fireproofing-floor  arches,  slabs,  partitions,  furring 
and  roof  blocks — and  they  shall  not  lump  or  sublet  the  instal- 
lation, if  the  labor  in  connection  therewith  is  bricklayers' 
work  as  recognized  by  the  trade,  the  men  employed  upon  the 
construction  of  the  walls  to  be  given  the  preference." 

"  (10)  No  members  of  these  Bricklayers'  Unions  shall  work 
for  any  one  not  complying  with  all  the  rules  and  regulations 
hereiu  agreed  tO;" 

The  first  agreement  between  the  Builders'  Association  and 
the  unions  was  entered  into  in  1885  and  provided  only  for 
rates  of  wages,  hours  of  labor,  and  arbitration  of  differences. 
The  agreements  since  that  time  have  embraced  the  provisions 


524    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

of  the  original  agreement  and  also  a  gradually  increasing 
number  of  other  important  stipulations.  Clause  5  in  substance 
was  inserted  in  the  agreement  of  1893  at  the  request  of  the 
unions  and  has  been  retained  in  subsequent  agreements. 
Clause  10  was  inserted  in  the  agreement  at  the  request  of  the 
association.  The  precise  time  when  this  was  done  does  not 
appear,  but  the  clause  was  in  force  before  the  complainant 
started  business  in  the  city  of  New  York. 

The  work  of  installing  tile  fireproofing  is  considered  to  be 
bricklayers'  work  by  the  trade,  and  it  would  be  impracticable 
for  the  complainant  to  undertake  such  work  in  the  city  of 
New  York  without  employing  members  of  the  Bricklayers' 
Unions.  Clause  10,  however,  provides  that  members  of  the 
unions  shall  only  work  for  persons  complying  with  all  the 
rules  and  regulations  of  the  agreement.  Among  them  is  clause 
5,  which  provides  that  the  work  of  installing  fireproofing  shall 
not  be  sublet  to  a  contractor,  but  must  be  included  in  the 
contract  for  the  building.  It  follows  therefore  that  these  two 
clauses  operate  to  prevent  the  complainant  from  installing  its 
fireproofing  in  New  York  City  unless  it  takes  the  entire  con- 
tract for  erecting  a  building,  which  it  is  not  authorized  by  its 
charter  to  do. 

In  actual  operation,  too,  the  clauses  in  question  have  pre- 
vented the  complainant  from  carrying  out  contracts  for  the 
installation  of  fireproofing.  Thus  in  1903  the  complainant 
had  a  contract  with  the  George  A.  Fuller  Company — a  general 
contractor  not  a  member  of  the  Builders'  Association — for 
installing  fireproofing  in  a  building  which  it  was  erecting 
under  contract  in  New  York  City.  The  association  notified 
the  complainant  that  its  agreement  with  the  unions  forbade 
building  contractors  subletting  the  installation  of  fireproofing, 
and  subsequently  aU  the  bricklayers  employed  upon  the  build- 
ing— including  those  engaged  upon  the  fireproofing — struck. 
Consequently  the  complainant  was  obliged  to  cancel  its  con- 
tract.   Other  similar  instances  are  shown  in  the  testimony. 

It  is  evident  therefore  that  these  clauses  affect  owners  and 
general  contractors  as  well  as  a  person  who,  like  the  com- 
plainant, desires  to  take  separate  fireproofing  contracts.  An 
owner  is  practically  unable  to  make  a  contract  for  fireproofing 
alone  because  if  he  does  the  bricklayers  will  not  only  refuse 


THE  COMMON  LAW  525 

to  do  that  work,  but  will  decline  to  do  the  other  work  upon 
the  building.  A  general  contractor,  whether  a  member  of  the 
association  or  not,  practically  cannot  sublet  the  fireproofing 
because  if  he  does  he  will  violate  clause  5,  and  the  bricklayers 
will  refuse  to  work  for  him. 

The  defendants  claim  that  the  object  of  clause  5  is  to  benefit 
the  bricklayers  by  giving  them  inside  as  well  as  outside  work 
and  by  preventing  specialization  in  their  trade.  This  subject 
is  fully  considered  in  the  opinion. 

The  object  of  clause  10  is,  obviously,  to  make  the  trade 
agreement  efifective  by  extending  its  operation  to  third  per- 
sons requiring  the  labor  of  bricklayers.  While  members  of 
the  unions  may  work  for  others  than  members  of  the  associa- 
tion, they  can  only  work  for  such  employers  as  follow  the 
rules  and  regulations  of  the  agreement.  Should  the  com- 
plainant obtain  the  power  to  make  general  building  contracts 
and  enter  into  such  contracts,  it  could  then  obtain  the  services 
of  members  of  the  unions  in  setting  the  fireproofing  required. 
The  complainant,  however,  does  not  wish  to  do  business  in 
this  manner.  It  desires  to  take  separate  contracts  for  fire- 
proofing installation  and  is  prevented  from  so  doing  business 
by  the  operation  of  the  clauses  in  question. 

The  allegations  of  the  amended  complaint  with  respect  to  a 
combination  to  injure  the  complainant,  accompanied  by 
threats  and  intimidation — except  as  they  relate  to  the  en- 
forcement against  it  of  these  clauses — are  not  supported  by 
the  evidence.  Whatever  the  defendants  have  done  has  been 
for  the  enforcement  of  such  clauses,  and  if  they  are  valid,  and 
their  execution  and  enforcement  in  the  manner  shown  lawful, 
no  independent  cause  of  action  is  established. 

Before  Lacombe,  Ward,  and  Noyes,  Circuit  Judges. 

NOYES,  Circuit  Judge  (after  stating  the  facts  as  above). 
In  considering  the  legal  questions  arising  in  this  case,  it  must 
be  borne  in  mind  at  the  outset  that  it  is  not  sufficient  to  show 
that  the  agreement  in  question  may  create  a  monopoly,  may 
be  in  restraint  of  trade,  or  may  be  opposed  to  public  policy. 
Agreements  of  that  nature  are  invalid  and  unenforceable. 
The  law  takes  them  as  it  finds  them,  and  as  it  finds  them 
leaves  them;  but  they  are  not  illegal  in  the  sense  of  giving  a 


526    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

right  of  action  to  third  persons  for  injury  sustained.  Brown 
V.  Jacobs'  Pharmacy  Co.,  115  Ga.  433,  57  L.  R.  A.  547,  90 
Am.  St.  Rep.  126.  And  upon  similar  principles  it  seeras 
equally  clear  that  they  afford  such  persons  no  ground  for 
seeking  an  injunction  against  injury  threatened. 

But  the  complainant  asserts  that  the  agreement  in  this  case 
is  positively  unlawful  and  not  merely  negatively  invalid — 
that  it  contravenes  both  national  and  state  statutes  against 
combinations,  and  thus  does  give  rights  of  action  to  injured 
persons.  With  respect  to  the  federal  statute,  it  is  not  obvious 
in  what  way  a  trade  agreement  between  builders  and  brick- 
layers, relating  to  their  work  in  the  state  of  New  York,  can 
be  said  to  directly  affect  interstate  commerce;  but  the  con- 
sideration of  this  question  is  not  necessary  because  a  person 
injured  by  a  violation  of  the  federal  act  cannot  sue  for  an 
injunction  under  it.  The  injunctive  remedy  is  available  to 
the  government  only.  An  individual  can  only  sue  for  three- 
fold damages.  Greer  v.  Stoller  (C.  C.)  77  Fed.  2;  Southern 
Indiana  Exp.  Co.  v.  United  States  Exp.  Co.  (C.  C.)  88  Fed. 
663.  See,  also,  Bement  v.  National  Harrow  Co.,  186  U.  S.  87, 
46  L.  Ed.  1058;  Post  v.  Southern  R.  Co.,  103  Tenn.  184,  55 
L.  R.  A.  481;  Metcalf  v.  American  School-Furniture  Co.  (C. 
C.)  108  Fed.  909;  Block  v.  Standard  Distilling,  etc.,  Co.  (C.  C.) 
95  Fed.  978;  Gulf,  etc.,  R.  Co.  v.  Miami  Steamship  Co.,  30 
C.  C.  A.  142;  Pidcock  v.  Harrington  (C.  C.)  64  Fed.  821; 
Hagan  v.  Blindell,  6  C.  C.  A.  86,  affirming  BlindeU  v.  Hagan 
(C.  C.)  54  Fed.  40. 

The  statute  of  New  York  which  it  is  claimed  that  the  de- 
fendants violate  provides  in  its  first  section  as  follows: 

"Every  contract,  agreement,  arrangement  or  combination, 
whereby  a  monopoly  in  the  manufacture,  production  or  sale 
in  this  state  of  any  article  or  commodity  of  common  use  is  or 
may  be  created,  established  or  maintained,  or  whereby  com- 
petition in  this  state  in  the  supply  or  price  of  any  such  article 
or  commodity  is  or  may  be  restrained  or  prevented,  or 
whereby,  for  the  purpose  of  creating,  establishing  or  main- 
taining a  monopoly  within  this  state  of  the  manufacture,  pro- 
duction or  sale  of  any  such  article  or  commodity,  the  free 
pursuit  in  this  state  of  any  lawful  business,  trade  or  occupa- 
tion, is  or  may  be  restricted  or  prevented,  is  hereby  declared 


THE  COMMON  LAW  527 

to  be  against  public  policy,  illegal  and  void."  Laws  1899,  p. 
1514,  c.  690. 

The  complainant  says  that  the  agreement  in  question 
violates  this  statute  because  it  tends  to  create  a  monopoly  in 
the  hands  of  members  of  the  association  and  other  general 
contractors  who  comply  with  its  provisions.  It  may  well  be 
doubted,  however,  whether  a  combination  of  employers  and 
employes  in  the  building  trade  could  ever  be  for  the  purpose 
of  creating  a  monopoly  "in  the  manufacture,  production  or 
sale  in  this  state  of  any  article  or  commodity  of  common  use." 
Be  that  as  it  may,  the  thing  which  is  essential  to  the  existence 
of  a  monopoly — the  concentration  of  business  in  the  hands  of 
a  few — is  not  present  here.  The  business  of  installing  fii^e- 
proofing  in  the  city  of  New  York  is  open  to  all  who  choose  to 
engage  in  it  under  existing  economic  conditions.  General 
contractors  cannot  be  said  to  have  a  monopoly  when  any  per- 
son can  be  a  general  contractor.  Members  of  the  unions 
cannot  be  said  to  be  monopolists  when  any  qualified  bricklayer 
can  join  a  union.  Moreover,  while  it  is  probable  under  the 
New  York  decisions  (Rourke  v.  Elk  Drug  Co.,  75  App.  Div. 
145)  that  a  person  specially  injured  by  a  violation  of  this 
anti-monopoly  statute  would  have  a  right  of  action  for  dam- 
ages, it  seems,  upon  the  principle  of  the  cases  cited  with 
respect  to  the  federal  statute,  that  only  the  Attorney  General 
can  sue  for  an  injunction;  such  a  suit  being  authorized  by  a 
section  of  the  statute. 

The  complainant,  thus  failing  to  show  any  right  to  an  in- 
junction upon  the  ground  that  the  agreement  is  contrary  to 
public  policy  or  in  contravention  of  any  state  or  national 
anti-trust  statute,  can  only  establish  that  it  is  entitled  to  such 
relief  by  showing  that  the  execution  of  the  agreement 
amounted  to  a  conspiracy,  and  that  its  enforcement  threatens 
injury;  and  to  ascertain  whether  the  complainant  has  estab- 
lished this  requires  the  examination  of  a  most  important 
phase  of  the  law  of  conspiracies  as  affecting  combinations  of 
labor  and  combinations  between  labor  and  capital. 

A  "conspiracy"  may  be  broadly  defined  as  a  combination 
to  effect  an  illegal  object  as  an  end  or  means.  And  a  "civil 
conspiracy,"  which  we  are  considering,  may  be  defined  as  a 
combination  of  two  or  more  persons  to  accomplish  by  con- 


528    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

certed  action  an  unlawful  or  oppressive  object;  or  a  lawful 
object  by  unlawful  or  oppressive  means.  To  sustain  an  action, 
damage  must  have  resulted  from  the  combination;  to  warrant 
an  injunction,  damage  must  be  threatened. 

And  so  the  inquiry  is:     (1)  Was  the  object  of  the  agreement 
unlawful  or  oppressive?      (2)  If  the  object  was  lawful  and 
free  from  oppression,  were  the  means  unlawful  or  oppressive? 
The  direct  object  or  purpose  of  a  combination  furnishes  the 
primary  test  of  its  legality.     It  is  not  every  injury  inflicted 
upon  third  persons  in  its  operation  that  renders  a  combina- 
tion unlawful.     It  is  not  enough  to  establish  illegality  in  an 
agreement   between   certain   persons  to   show   that   it   works 
harm  to  others.     An  agreement  entered  into  for  the  primary 
purpose  of  promoting  the  interests  of  the  parties  is  not  ren- 
dered illegal  by  the  fact  that  it  may  incidentally  injure  third 
persons.     Conversely,  an  agreement  entered  into  for  the  pri- 
mary purpose  of  injuring  another  is  not  rendered  legal  by  the 
fact  that  it  may  incidentally  benefit  the  parties.    As  a  general 
rule  it  may  be  stated  that,  when  the  chief  object  of  a  com- 
bination is  to  injure  or  oppress  third  persons,  it  is  a  con- 
spiracy; but  that  when  such  injury  or  oppression  is  merely 
incidental  to  the  carrying  out  of  a  lawful  purpose,  it  is  not 
a  conspiracy.     Stated  in  another  way :     A  combination  en- 
tered into  for  the  real  malicious  pui-pose  of  injuring  a  third 
person  in  his  business  or   property  may   amount  to   a   con- 
spiracy and  furnish  a  ground  of  action  for  the  damages  sus- 
tained, or  call  for  an  injunction,  even  though  formed  for  the 
ostensible    pui'pose    of   benefiting   its   members    and    actually 
operating  to  some  extent  to  their  advantage ;  but  a  combina- 
tion  without    such    ulterior    oppressive    object,    entered   into 
merely  for  the  purpose  of  promoting  by  lawful  means  the 
common   interests   of   its  members,   is  not   a   conspiracy.     A 
laborer,  as  well  as  a  builder,  trader,  or  manufacturer,  has  the 
right  to  conduct  his  affairs  in  any  lawful  manner,  even  though 
he  may  thereby  injure  others.     So  several  laborers  and  build- 
ers may  combine  for  mutual  advantage,  and,  so  long  as  the 
motive  is  not  malicious,  the  object  not  unlawful  nor  oppres- 
sive, and  the  means  neither  deceitful  nor  fraudulent,  the  result 
is  not  a  conspiracy,  although  it  may  necessarily  work  injury 
to  other  persons.    The  damage  to  such  persons  may  be  serious 


THE  COMMON  LAW  529 

— it  may  even  extend  to  their  ruin — but  if  it  is  inflicted  by  a 
combination  in  the  legitimate  pursuit  of  its  own  affairs,  it  is 
damnum  absque  injuria.  The  damage  is  present,  but  the 
unlawful  object  is  absent.  And  so  the  essential  question  must 
always  be  whether  the  object  of  a  combination  is  to  do  harm 
to  others  or  to  exercise  the  rights  of  the  parties  for  their  own 
benefit. 

These  principles  are  well  settled  by  the  leading  cases  upon 
conspiracies.  Thus  in  the  celebrated  case  of  Mogul  Steamship 
Co.  V.  McGregor,  L.  R.  21  Q.  B.  552,  Lord  Chief  Justice 
Coleridge  said : 

"I  do  not  doubt  the  acts  done  by  the  defendants  here,  if 
done  wrongfully  and  maliciously,  or  if  done  in  furtherance  of 
a  wrongful  and  malicious  combination,  would  be  ground  for 
an  action  on  the  case  at  the  suit  of  one  who  has  suffered  injury 
from  them.  The  question  comes  at  last  to  this:  What  was 
the  character  of  those  acts,  and  what  was  the  motive  of  the 
defendants  in  doing  them?" 

And  when  the  Mogul  Steamship  Case  came  to  the  House  of 
Lords  (L.  R.   [1892]  App.  Cas.  25,  58),  Lord  Hannen  said: 

"The  question,  however,  raised  for  our  consideration  in 
this  case  is  whether  a  person  who  has  suffered  loss  in  his 
business  by  the  joint  action  of  those  who  have  entered  into 
such  an  agreement  can  recover  damages  from  them  for  the 
injury  so  sustained.  In  considering  this  question,  it  is  neces- 
sary to  determine  upon  the  evidence  what  was  the  object  of 
the  agreement  between  the  defendants  and  what  were  the 
means  by  which  they  sought  to  attain  that  object.  It  appears 
to  me  that  their  object  was  to  secure  to  themselves  the  benefit 
of  the  carrying  trade  from  certain  points.  ...  I  consider 
that  a  different  case  would  have  arisen  if  the  evidence  had 
shown  that  the  object  of  the  defendants  was  a  malicious  one, 
namely,  to  injure  the  plaintiff  whether  they  (the  defendants) 
should  be  benefited  or  not." 

The  cases  relating  particularly  to  combinations  of  labor 
also  state  the  same  doctrine.  Thus  in  National  Protective 
Ass'n  V.  Cumming,  170  N.  Y.  315,  328,  372,  58  L.  R.  A.  135, 
88  Am.  St.  Rep.  648,  Chief  Judge  Parkee  said : 

"It  is  only  where  the  sole  purpose  is  to  do  injury  to  another, 
or  the  act  is  promoted  by  malice,  that  it  is  insisted  that  the 

Kales  B.  of  T.  Vol.  1—34 


530    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

act  becomes  illegal.  No  such  motive  is  alleged  in  that  finding. 
It  is  not  hinted  at.  On  the  contrary,  the  motive  which  always 
underlies  competition  is  asserted  to  have  been  the  animating 
one." 

And  in  the  concurring  opinion  in  the  same  case,  Judge  Gray 
said: 

"The  struggle  on  the  part  of  individuals  to  prefer  them- 
selves, and  to  prevent  the  work  which  they  are  fitted  to  do 
from  being  given  to  others,  may  be  keen  and  may  have  un- 
happy results  in  individual  cases ;  but  the  law  is  not  concerned 
with  such  results,  when  not  caused  by  illegal  means  or  acts." 

In  Jacobs  v.  Cohen,  183  N.  Y.  207,  211,  2  L.  R.  A.  (N.  S.) 
292,  111  Am.  St.  Rep.  730,  Judge  Gray  also  said: 

"Nor  does  the  answer  aver  that  it  was  intended  thereby  to 
injure  other  workmen;  or  that  it  was  made  with  a  malicious 
motive  to  coerce  any  to  their  injury,  through  their  threatened 
deprivation  of  all  opportunity  of  pursuing  their  lawful  avo- 
cation." 

In  the  same  case  the  judge  further  said  regarding  the  agree- 
ment there  in  question: 

"That,  incidentally,  it  might  result  in  the  discharge  of 
some  of  those  employed,  for  failure  to  come  into  affiliation 
with  their  fellow  workmen's  organization,  or  that  it  might 
prevent  others  from  being  engaged  upon  the  work,  is  neither 
something  of  which  the  employers  may  complain,  nor  some- 
thing with  which  public  policy  is  concerned." 

In  Mills  V.  United  States  Printing  Co.,  99  App.  Div.  605, 
612,  another  New  York  case,  the  court  said: 

"There  is  a  manifest  distinction,  well  recognized,  between 
a  combination  of  workmen  to  secure  the  exclusive  employment 
of  its  members  by  a  refusal  to  work  with  none  other,  and  a 
combination  whose  primary  object  is  to  procure  the  discharge 
of  an  outsider  and  his  deprivation  of  all  employment.  In  the 
first  case,  the  action  of  the  combination  is  primarily  for  the 
betterment  of  its  fellow  members.  In  the  second  case,  such 
action  is  primarily  'to  impoverish  and  to  crush  another'  by 
making  it  impossible  for  him  to  work  there,  or,  so  far  as  may 
be  possible,  anywhere.  The  difference  is  between  combination 
for  welfare  of  self  and  that  for  the  persecution  of  another. 
The  primary  purpose  of  one  may  necessarily  but  incidentally 


THE  CO]\OrON  LAW  531 

require  the  discharge  of  an  outsider;  the  primary  purpose  of 
the  other  is  such  discharge  and,  so  far  as  possible,  an  exclusion 
from  all  labor  in  his  calling.  Self-protection  may  cause  in- 
cidental injury  to  another.  Self-protection  does  not  aim  at 
malevolent  injury  to  another." 

In  Vegelahn  v.  Guntuer,  167  Mass.  92,  98,  35  L.  R.  A.  722, 
57  Am.  St.  Rep.  443,  Justice  Allen  said : 

"A  combination  among  persons  merely  to  regulate  their 
own  conduct  is  within  allowable  competition  and  is  lawful, 
although  others  may  be  indirectly  affected  thereby;  but  a 
combination  to  do  injurious  acts,  expressly  directed  to  an- 
other, by  way  of  intimidation  or  restraint  either  of  himself  or 
of  other  persons  employed  or  seeking  to  be  employed  by  him, 
is  outside  of  allowable  competition  and  is  unlawful." 

In  Allis-Chalmers  Co.  v.  Iron  Moulders'  Union  (C.  C.)  150 
Fed.  155,  Judge  SiVJs^BORN  said : 

"The  conclusion  to  be  drawn  from  the  cases,  as  applicable 
to  this  controversy,  is,  I  think,  that  the  combination  of  the 
defendant  unions,  their  members  and  the  defendant  O'Leary, 
to  strike,  and  further  to  enforce  the  strike  and  if  possible  to 
bring  the  employers  to  terms  by  preventing  them  from  ob- 
taining other  workmen  to  replace  the  strikers,  was  not  unlaw- 
ful, because  grounded  on  just  cause  or  excuse,  being  the 
economic  advancement  of  the  union  moulders,  and  the  com- 
petition of  labor  against  capital." 

In  Allen  v.  Flood,  L.  R.  (1898)  App.  Cas.  1,  164,  Lord 
Shand  said : 

"The  object  was  to  benefit  themselves  in  their  own  business 
as  working  boiler  makers,  and  to  prevent  a  recurrence  in  the 
future  of  what  they  considered  an  improper  invasion  on  their 
special  department  of  work.  How  this  could  possibly  be  re- 
garded as  'malicious,'  even  in  any  secondary  sense  that  can 
reasonably  be  attributed  to  that  term,  I  cannot  see." 

In  Quinn  v.  Leathem,  L.  R.  (1901)  App.  Cas.  495,  Lord 
Shand,  in  speaking  of  Allen  v.  Flood,  supra,  said : 

"In  that  case  I  expressed  my  opinion  that  while  combination 
of  different  persons  in  pursuit  of  a  trade  object  was  lawful, 
although  resulting  in  such  injury  to  others  as  may  be  caused 
by  legitimate  competition  in  labour,  yet  that  combination  for 
no  such  object,  but  in  pui-suit  merely  of  a  malicious  purpose 


532    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

to  injure  another,  would  be  clearly  unlawful ;  and  having  con- 
sidered the  arguments  in  this  case,  my  opinion  has  only  been 
confirmed." 

The  principal  case  relied  upon  by  the  complainant  (Curran 
V.  Galen,  152  N.  Y.  33,  37  L.  R.  A.  802,  57  Am.  St.  Rep.  496), 
when  analyzed  will  not  be  found  to  conflict  with  the  principles 
ju&t  stated.  It  was  held  in  that  case,  in  substance,  that  if  the 
prime  purpose  of  a  combination  of  workingmen  is  to  restrict 
the  citizen  in  pursuing  his  lawful  calling  and  through  con- 
tracts with  employers  to  coerce  other  workingmen  to  become 
members  of  the  combination,  such  purpose  is  against  public 
policy  and  renders  the  combination  unlawful,  notwithstanding 
it  may  possess  other  features  of  advantage  to  its  members. 
As  said  by  the  court  in  its  opinion : 

"Public  policy  and  the  interests  of  society  favor  the  utmost 
freedom  in  the  citizen  to  pursue  his  lawful  trade  or  calling, 
and  if  the  purpose  of  an  organization  or  combination  of  work- 
ingmen be  to  hamper,  or  to  restrict,  that  freedom,  and,  through 
contracts  or  arrangements  with  employers,  to  coerce  other 
workingmen  to  become  members  of  the  organization  and  to 
come  under  its  rules  and  conditions,  under  the  penalty  of  the 
loss  of  their  position,  and  of  deprivation  of  emplojnnent,  then 
that  purpose  seems  clearly  unlawful  and  militates  against  the 
spirit  of  our  government  and  the  nature  of  our  institutions." 

But  the  court  went  on  to  say  that  if  the  organization  were 
for  the  purpose  of  promoting  the  general  good  of  its  members, 
it  would  not  be  invalid,  and  quoted  with  approval  the  instruc- 
tions given  to  a  jury  in  an  English  case  (Regina  v.  Rowlands, 
17  Ad.  &  Ellis  [N.  S.]  671)  : 

"A  combination  for  the  purpose  of  injuring  another  is  a 
combination  of  a  different  nature,  directed  personally  against 
the  party  to  be  injured,  and  the  law  allowing  them  to  combine 
for  the  purpose  of  obtaining  a  lawful  benefit  to  themselves 
gives  no  sanction  to  combinations  which  have  for  their  imme- 
diate purpose  the  hurt  of  another.  The  rights  of  workmen 
are  conceded;  but  the  exercise  of  free  will  and  freedom  of 
action,  within  the  limits  of  the  law,  is  also  secured  equally  to 
the  masters.  The  intention  of  the  law  is,  at  present,  to  allow 
either  of  them  to  follow  the  dictates  of  their  own  will,  with 
respect  to  their  own  actions,  and  their  own  property,   and 


THE  COMMON  LAW  533 

either,  I  believe,  has  a  right  to  study  to  promote  his  own 
advantage,  or  to  combine  with  others  to  promote  their  own 
mutual  advantage." 

It  is  evident  therefore  that  the  combination  in  Curran  v. 
Galen  was  condemned  because  its  primary  purpose  was  to 
coerce  workingmen  to  join  it;  any  other  objects  being  merely 
incidental.  As  said  by  Judge  Martin  in  his  dissenting  opinion 
in  the  later  case  of  Park  &  Sons  Co.  v.  National  Druggists' 
Ass'n,  175  N.  Y.  40,  62  L.  R.  A.  632,  96  Am.  St.  Rep.  578: 

"As  we  have  already  seen,  this  court  in  Curran  v,  Galen 
unanimously  held  that  a  combination  or  association  of  work- 
ingmen whose  purpose  was  to  hamper  or  restrict  the  freedom 
of  the  citizen  in  pursuing  his  lawful  trade  or  calling,  through 
contracts  or  arrangements  with  employers  to  coerce  working- 
men  to  become  members  of  the  organization  and  to  come 
under  its  rules  and  conditions  under  penalty  of  loss  of  their 
positions  and  of  deprivation  of  employment,  was  against  pub- 
lic policy  and  unlawful."     (Italics  ours.) 

And  in  National  Protective  Ass'n  v.  Gumming,  170  N.  Y, 
334,  58  L.  R.  A.  135,  88  Am.  St.  Rep.  648,  already  referred  to, 
Judge  Gray  said : 

"The  case  is  not  within  the  principle  of  Curran  v.  Galen, 
152  N.  Y.  33,  37  L.  R.  A.  802,  57  Am.  St.  Rep.  496.  Upon  the 
facts  of  that  case,  as  they  were  admitted  by  the  demurrer  to 
the  complaint,  the  plaintiff  was  threatened,  if  he  did  not  join 
a  certain  labor  organization,  and  so  long  as  he  refused  to  do 
so,  with  such  action  as  would  result  in  his  discharge  from  the 
employment  and  in  an  impossibility  for  him  to  obtain  other 
employment  any^vhere,  and,  in  consequence  of  continuing  his 
refusal  to  join  the  organization,  his  discharge  was  procured 
through  false  and  malicious  reports  affecting  his  reputation 
with  members  of  his  trade  and  with  employers.  There  is  no 
such  compulsion,  or  motive,  manifest  here.  There  is  no  malice 
found.    There  is  no  threat  of  a  resort  to  illegal  methods." 

Applying  the  principles  which  we  have  thus  far  ascertained 
to  the  facts  of  the  present  case,  do  we  find  that  the  object  of 
the  defendants  in  entering  into  the  agreement  embracing  the 
clauses  in  question  was  to  injure  the  complainant  or  to  benefit 
themselves? 

The  object  of  clause  10  manifestly  was  to  make  the  stipula- 


534    COMBINATIONS  AND  RESTI^INT  OP  TRADE 

tions  of  the  agreement  generally  effective.  The  mason  builders 
joining  in  the  agreement  being  bound  by  its  stipulations,  it 
was  necessary  for  their  protection  that  competing  outside 
builders  should  only  employ  bricklayers  upon  the  same  con- 
ditions. So  it  was  for  the  advantage  of  the  bricklayers  them- 
selves to  have  means  for  enforcing  uniformity  in  terms  of 
employment. 

It  also  seems  clear  from  the  testimony  that  the  object  of 
clause  5  was  to  benefit  the  bricklayers.  Certainly  from  their 
point  of  view  substantial  benefits  accrue  from  preventing  the 
installation  of  fireproofing  by  separate  contractors.  Through 
the  operation  of  this  clause  the  men  who  do  the  exposed  work 
secure  the  easier  and  safer  inside  work  and  more  continuous 
employment  than  would  otherwise  be  the  case.  The  special- 
ization of  the  bricklayers'  trade  through  the  growth  of  a  class 
of  workmen,  who  would  devote  themselves  to  setting  fire  briok 
and  would,  in  the  end,  take  all  that  work  from  the  ordinary 
bricklayer,  is  prevented. 

It  is  true  that  the  complainant  contends  that  these  ad- 
vantages are  fanciful  rather  than  real,  and  points  out  that 
much  of  the  fireproofing  is  laid  before  the  walls.  Still  it 
appears  that  a  very  large  amount  of  fireproofing  is  done  after 
the  walls  are  completed,  and  the  contention  of  the  bricklayers 
that  they  obtain  advantages  through  the  operation  of  clause 
5  in  securing  different  kinds  of  work  and  steady  employment 
seems  well  founded.  The  complainant  also  contends  that 
there  would  be  no  danger  of  specialization  in  the  bricklayers' 
trade  should  it  take  separate  contracts  for  installing  fire- 
proofing, but  the  evidence  does  not  support  this  contention. 
On  the  contrary,  it  indicates  that  the  apprehensions  of  the 
bricklayers,  as  shovni  upon  the  record,  are  not  without  foun- 
dation. 

Considering  all  the  testimony,  we  are  satisfied  that  the 
direct  object  of  the  adoption  of  the  clauses  in  question  was  to 
benefit  the  parties  and  not  to  injure  the  complainant  or  other 
persons  in  a  similar  situation.  Any  particular  or  special  in- 
tention to  injure  the  complainant  is,  of  course,  negatived  by 
the  fact  that  the  clauses  in  question  were  inserted  in  the  trade 
agreement  between  the  parties  long  before  the  complainant 
undertook  to  do  any  business  in  the  city  of  New  York. 


THE  COMIVION  LAW  535 

The  object  of  the  agreement  being  neither  unlawful  nor 
oppressive,  the  next  inquiry  is  whether  the  means  adopted  to 
make  it  effective  were  unlawful  or  oppressive. 

As  indicated  in  the  statement  of  facts,  no  threats  or  acts  of 
intimidation  except  in  connection  with  the  enforcement  of 
clause  5  are  shown.  Instances  do  appear,  however,  in  which 
bricklayers  struck  and  ceased  to  work  because  they  claimed 
that  work  was  being  done  in  violation  of  this  clause.  So, 
statements  were  made  by  members  of  the  Builders'  Associa- 
tion and  of  the  unions  that  the  complainant  would  not  be 
permitted  to  take  separate  contracts  for  the  installation  of 
fireproofing.  It  is  unnecessary  to  review  the  acts  of  the  de- 
fendants in  detail.  We  are  not  satisfied  that  if  the  defendants 
or  their  representatives  made  threats,  they  threatened  to  do 
anything  which  they  had  no  right  to  do.  The  object  of  the 
agreement  was  not  unlawfuh  The  defendants  had  the  right 
to  strike  to  secure  its  enforcement.  They  also  had  the  right 
to  notify  the  complainant  and  persons  with  whom  it  had 
dealings  that  it  could  not  take  contracts  for  the  installation 
of  fireproofing  contrary  to  the  terms  of  the  agreement  with- 
out incurring  its  penalties.  But  a  threat  to  do  that  which  a 
person  has  the  right  to  do  is  not  unlawful.  In  National  Pro- 
tective Ass'n  V.  Gumming,  170  N.  Y.  315,  330,  373,  58  L.  R.  A. 
135,  88  Am.  St.  Rep.  648,  already  referred  to,  the  court  said: 

"They  did  not  threaten  to  employ  any  illegal  method  to 
accomplish  that  result.  They  notified  them  of  the  purpose  of 
the  defendants  to  secure  this  work  for  themselves  and  to  pre- 
vent McQueed  and  his  associates  from  getting  it,  and  in  doing 
that  they  but  informed  them  of  their  intention  to  do  what  they 
had  a  right  to  do,  and  when  a  man  purposes  to  do  something 
which  he  has  a  legal  right  to  do,  there  is  no  law  which  pre- 
vents him  from  teUing  another  who  will  be  affected  by  his 
act  of  his  intention." 

And  in  Park  &  Sons  v.  National  Druggists'  Ass'n,  175  N.  Y. 
1,  20,  143,  62  L.  R.  A.  632,  96  Am.  St.  Rep.  578,  it  was  also  said : 

"There  are  no  threats  alleged  in  this  complaint  on  the  part 
of  defendants  to  do  anything  except  that  which  they  have  a 
right  to  do,  if  the  views  so  far  expressed  be  sound,  and  as  we 
said  in  that  case,  and  it  is  proper  to  repeat  here,  that  a  man 
may  threaten  to  do  that  which  the  law  says  he  may  do,  pro- 


536    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

vided  that,  within  the  rule  laid  down  in  certain  eas^'=  therein 
cited,  his  motive  is  to  help  himself," 

It  therefore  follows  that  the  defendants  have  not  entered 
into  a  combination  to  accomplish  an  unlavtrEul  or  oppressive 
object,  or  a  lawful  object  by  unlawful  or  oppressive  means, 
and  are  not  guilty  of  a  common-law  conspiracy. 

Finally,  the  complainant  contends  that  the  agreement 
amounts  to  a  conspiracy  under  the  Penal  Code  of  the  state  of 
New  York  (section  168,  subds.  5  and  6).  But  the  principles 
applicable  to  conspiracies  at  common  law,  which  we  have 
considered,  apply  to  conspiracies  under  the  statute.  The  test 
of  the  application  of  the  statute  is  the  purpose  of  the  com- 
bination, and  if  the  object  and  means  be  lawful,  there  is  no 
conspiracy,  even  though  a  third  person  may  be  incidentally 
injured. 

And  so  the  conclusion  must  be  that  the  Circuit  Court  was 
right  in  dismissing  the  complaint.  Nevertheless  it  cannot  be 
denied  that  the  complainant  has  ground  for  complaining.  It 
desires  to  engage  in  a  lawful  and  legitimate  business  in  a 
lawful  and  legitimate  way  and  is  practically  prevented  from 
so  doing  by  the  acts  of  the  defendants.  Its  right  to  do  busi- 
ness in  the  manner  it  desires  is  interfered  with,  and  the  law 
affords  it  no  remedy  because  such  interference  is  only  inci- 
dental to  the  exercise  by  the  defendants  of  their  own  right 
to  contract  for  their  own  benefit.  The  complainant  is  injured, 
but  has  no  remedy.  The  law  could  only  make  it  possible  for 
the  complainant  to  do  business  in  the  way  it  chooses  by  com- 
pelling the  defendants  to  do  business  in  the  way  they  do  not 
choose.  But,  when  equal  rights  clash,  the  law  cannot  inter- 
fere. 

Decree  affirmed,  with  costs. 


STATE  EX  REL  DURNER  v.  HUEGIN 

(Supreme  Court  of  Wisconsin,  1901.     110  Wis.  189. )77 

Writ  of  error  to  the  circuit  court  for  Milwaukee  county  to 
review  orders  thereof,  in  habeas  corpus  proceedings,  discharg- 

77 — Statement  abridged  and  paxt 
of  opinion  omitted. 


THE  COIVEVION  LAW  537 

ing  certain  persons  from  custody  who  were  under  restraint, 
according  to  forms  of  law,  to  await  trial  for  the  offense  of 
conspiracy  to  injure.  The  complaint  charging  the  offense 
was  under  oath  and  as  follows: 

"Lucius  W.  Nieman  and  Lloyd  T.  Boyd,  of  the  city  of 
Milwaukee,  in  said  county  of  Milwaukee,  being  severally  first 
duly  sworn,  complain  to  the  police  court  for  the  city  of  Mil- 
waukee, Milwaukee  county,  Wisconsin,  that  on  or  about  the 
5th  day  of  April,  A.  D.  1900,  at  the  city  of  Milwaukee,  and 
within  Scid  county  of  Milwaukee,  Andrew  J,  Aikens,  Albert 
Huegin  and  Melvin  A.  Hoyt,  did  then  and  there  unlawfully 
conspire,  combine,  confederate,  associate,  agree,  mutually  un- 
dertake and  concert  together  for  the  purpose  and  with  the 
intent  then  and  there  of  willfully  and  maliciously  injuring  the 
Journal  Company,  a  corporation  duly  organized  and  existing 
under  and  by  virtue  of  the  laws  of  the  state  of  Wisconsin,  in 
its  trade  and  business,  and  for  the  purpose  and  with  the  intent 
then  and  there  of  willfully  and  maliciously  injuring  Lucius 
W.  Nieman,  Lloyd  T.  Boyd  and  John  W,  Schaum,  and  each  of 
them,  in  their  trade,  business  and  occupation;  that  the  said 
the  Journal  Company  at  all  of  said  times  was,  ever  since  has 
been  and  now  is  a  corporation  organized  and  existing  under 
and  by  virtue  of  the  laws  of  the  state  of  Wisconsin,  as  afore- 
said, and  at  all  of  said  times  was  and  now  is  the  owner  and 
publisher  of  a  daily  newspaper  and  advertising  medium 
known  as  the  Milwaukee  Journal,  published  at  the  said  city 
of  Milwaukee,  which  said  newspaper  at  all  of  the  times  herein 
referred  to  had,  and  now  has,  a  large  circulation  as  a  news- 
paper and  advertising  medium  in  the  city  of  Milwaukee,  and 
throughout  the  state  of  Wisconsin  and  elsewhere ;  that  it  was 
at  all  of  said  times,  and  now  is,  the  business  and  trade  of  said 
the  Journal  Company  to  publish  said  newspaper  and  to  sell 
and  furnish  the  same  to  its  patrons  and  subscribers,  and  to 
solicit,  receive,  print  and  publish  in  said  newspaper  for  hire 
advertisements  for  merchants  and  other  persons,  as  is  cus- 
tomary with  such  newspapers,  and  that  at  all  of  said  times 
and  especially  at  the  time  of  the  said  combination  and  con- 
spiracy, and  subsequently  thereto,  the  said  the  Journal  Com- 
pany had  a  large  number  of  advertisers  or  patrons  who  ad- 
vertised in  said  newspaper,  the  Milwaukee  Journal,  and  that 
a  large  portion  of  the  revenue  of  said  the  Journal  Company 


538    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

was  and  is  derived  from  such  advertisements;  that  the  said 
Lucius  W.  Nieman,  Lloyd  T.  Boyd  and  John  W.  Schaum  were 
at  all  of  said  times  and  now  are,  stockholders  in  said  the 
Journal  Company,  and  financially  interested  in  the  business 
and  success  of  said  the  Journal  Company;  that  the  business 
and  trade  of  the  said  Lucius  W.  Nieman  is,  among  other 
things,  that  of  editor  of  said  the  Milwaukee  Journal,  and  the 
business  and  trade  of  said  Lloyd  T.  Boyd  is  that  of  business 
manager  of  said  the  Journal  Company  and  of  the  said  the 
Milwaukee  Journal ;  and  that  at  all  of  said  times  the  business 
of  said  John  W.  Schaum  was  and  is  that  of  treasurer  of  said 
the  Journal  Company, 

''That  the  prices  of  advertisements  and  the  advertising 
rates  which  newspapers  such  as  said  the  Milwaukee  Journal 
and  the  other  newspapers  herein  mentioned  are  entitled  to 
charge,  and  which  advertisers  and  patrons  are  willing  to  pay, 
depend  and  are  based  largely  upon  the  circulation  of  such 
papers  and  the  number  of  their  readers;  that  early  in  the 
year  A.  D.  1900,  said  the  Journal  Company  in  good  faith 
established  a  new  rate  for  advertising  in  said  the  Milwaukee 
Journal,  based,  among  other  things,  upon  its  increased  cir- 
culation, and  notified  the  patrons  of  and  advertisers  in  the 
said  the  Milwaukee  Journal  thereof,  which  said  rate  for  ad- 
vertising was  an  increase  of  about  25  per  cent,  above  that 
which  was  charged  by  said  the  Journal  Company  for  like 
advertising  in  the  year  1899. 

''That  at  all  of  said  times  the  said  Andrew  J.  Aikens  was, 
and  now  is,  the  business  manager  of  the  Evening  Wisconsin,  a 
daily  newspaper  published  in  the  city  of  Milwaukee,  and 
having  also  an  extensive  circulation  and  devoted  to  the  pur- 
poses of  a  general  newspaper  and  to  advertising  for  hire,  like 
unto  said  the  Milwaukee  Journal ;  that  at  all  of  said  times 
said  Albert  Huegin  was,  and  now  is,  the  business  manager  of 
the  Milwaukee  Sentinel,  a  daily  newspaper  published  at  the 
city  of  Milwaukee,  having  an  extensive  circulation  and  de- 
voted to  the  purposes  of  a  general  newspaper  and  to  advertis- 
ing for  hire,  like  unto  the  newspapers  aforementioned ;  that 
at  all  of  said  times  said  Melvin  A.  Hoyt  was,  and  now  is,  the 
editor  of  the  Milwaukee  Daily  News,  and  the  president  of  the 
News  Publishing  Company,  the  corporation  owning  said  the 


THE  COMMON  LAW  539 

Milwaukee  Daily  News,  a  daily  newspaper  published  at  the 
city  of  Milwaukee  and  devoted  to  the  purposes  of  a  general 
newspaper  and  to  advertising  for  hire,  like  unto  the  other  of 
said  newspapers. 

"That  on  or  about  said  5th  day  of  April,  A.  D.  1900,  the 
exact  date  whereof  being  unknown  to  affiants,  said  Andrew  J. 
Aikens,  Albert  Nuegin  and  Melvin  A.  Hoyt,  with  others  un- 
known to  affiant,  in  furtherance  and  in  pursuance  of  said 
unlawful  conspiracy,  combination,  confederation,  association, 
agreement  and  mutual  understanding,  for  the  purpose  and 
with  the  intent  then  and  there  of  wUlfully,  maliciously  and 
unlawfully  injuring  said  the  Journal  Company  in  its  trade 
and  business,  and  also  said  Lucius  W.  Nieman,  Lloyd  T.  Boyd 
and  John  W.  Schaum,  and  each  of  them,  in  their  trade  and 
business,  and  to  that  end  and  with  the  purpose  and  intent 
aforesaid,  did  confederate,  agree  and  mutually  undertake  that 
if  any  merchant  or  other  person  or  corporation  advertising  or 
proposing  to  advertise  in  said  the  Milwaukee  Journal,  should 
pay  or  agree  to  pay  to  said  the  Journal  Company  the  increased 
rate  for  advertising  established  or  fixed  by  it  as  aforesaid, 
that  then  and  in  that  case  any  such  person  or  corporation 
should  not  be  permitted  to  advertise  in  any  of  said  other  three 
newspapers,  to  wit:  said  the  Milwaukee  Sentinel,  the  Evening 
Wisconsin,  and  the  Milwaukee  Daily  News,  unless  such  mer- 
chant, other  person  or  corporation  should  advertise  in  each 
of  said  three  papers  and  pay  to  each  of  them  or  to  the 
respective  owners  or  proprietors  of  them,  a  corresponding 
increase  over  the  rates  respectively  theretofore  charged  by 
such  other  three  newspapers  respectively,  to  wit:  about  25 
per  cent,  in  excess  of  what  said  last-mentioned  three  papers 
respectively  were  then  charging  and  had  theretofore  charged 
for  advertising;  but  that  in  case  any  merchant,  other  person 
or  corporation  should  refuse  to  pay  to  said  the  Journal  Com- 
pany the  said  increased  rate  established  by  it  as  aforesaid  for 
advertising  in  said  the  Milwaukee  Journal,  then  and  in  that 
case  such  merchant  or  other  person  or  corporation  so  refusing 
should  be  at  liberty  to  advertise  in  any  or  all  of  the  other  of 
said  tliree  newspapers  at  the  rates  which  had  theretofore  been 
charged  by  said  other  three  newspapers  respectively;  that  a 
large  number  of  merchants  in  the  city  of  Milwaukee  and  other 


540    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

persons  were  at  the  time  of  said  combination  and  agreement, 
and  subsequently  thereto,  advertising  in  all  of  said  news- 
papers, to  wit:  the  Milwaukee  Journal,  the  Evening  Wiscon- 
sin, the  Milwaukee  Sentinel  and  the  Milwaukee  Daily  News, 
and  that  the  right  or  privilege  to  advertise  in  two  or  more 
of  said  papers  was  and  is  considered  and  regarded  by  a  large 
number  of  such  merchants  and  other  persons  as  a  valuable 
right  and  privilege  and  one  much  to  be  desired;  that  all  or 
the  greater  part  of  the  patrons  of  and  persons  advertising  in 
said  the  Milwaukee  Journal  were,  pursuant  to  said  combina- 
tion and  conspiracy  on  the  part  of  said  Aikens,  Iluegin  and 
Hoyt,  and  in  furtherance  thereof,  notified  by  them  of  the 
said  agreement,  conspiracy  and  combination  between  said 
Andrew  J.  Aikens,  Albert  Huegin  and  Melvin  A.  Hoyt,  that 
many  of  the  patrons  and  advertisers  in  said  the  Milwaukee 
Journal  were  induced  thereby  to  withdraw  their  advertise- 
ments therefrom,  greatly  to  the  injury  of  the  business  and 
trade  of  said  the  Journal  Company  and  of  said  Luciiis  W. 
Nieman,  Lloyd  T.  Boyd  and  John  W.  Schaum;  that  pursuant 
to  said  combination,  agreement,  confederation  and  conspiracy, 
and  in  furtherance  thereof,  said  Andrew  J,  Aikens,  Albert 
Huegin  and  Melvin  A.  Hoyt,  did  refuse  to  allow  the  adver- 
tisements of  divers  merchants  and  other  persons  to  be  inserted 
in  either  the  Milwaukee  Sentinel,  the  Evening  Wisconsin  or 
the  Milwaukee  Daily  News  aforesaid,  and  did  prevent  the 
advertisements  of  divers  merchants  and  other  persons  from 
appearing  in  all  or  any  of  said  three  last-mentioned  news- 
papers because  such  merchants  or  other  persons  so  prevented 
had  paid  or  had  agreed  to  pay  to  said  the  Journal  Company 
the  said  increased  rate  for  advertising  established  by  it  as 
aforesaid ;  and  that  by  reason  of  said  combination,  conspiracy 
and  agreement  many  merchants  in  the  city  of  Milwaukee  and 
elsewhere,  and  other  persons,  were  prevented  from  advertis- 
ing in  said  the  Milwaukee  Journal,  greatly  to  the  injury  of 
the  business  and  trade  of  said  the  Journal  Company,  and  of 
said  Lucius  W.  Nieman,  Lloyd  T.  Boyd  and  John  W.  Schaum, 
and  of  each  of  them,  contrary  to  the  statute  in  such  case  made 
and  provided,  and  against  the  peace  and  dignity  of  the  state 
of  Wisconsin. 

"Wherefore,  affiants  pray  that  the  said  Andrew  J.  Aikens, 


THE  COIVBION  LAW  541 

Albert  Huegin  and  Melvin  A.  Hoji;  be  arrested  and  dealt 
with  according  to  law." 

The  complaint  was  filed  with  the  police  court  in  the  city  of 
Milwaukee  and  such  proceedings  were  thereupon  had,  based 
thereon,  that  the  defendants  therein  named  were  arrested  and 
produced  before  such  court  for  a  preliminary  examination, 
whereupon  a  motion  was  made  for  their  discharge  upon  the 
ground  that  the  allegations  of  the  complaint  were  not  suf- 
ficient to  show  that  a  criminal  offense  had  been  committed. 
The  motion  was  overruled.  Thereupon  evidence  was  taken 
before  the  court,  tending  to  establish  the  allegations  of  the 
complaint.  At  the  close  of  the  evidence  a  motion  was  made 
to  discharge  each  of  the  defendants,  which  was  denied.  The 
court  then  decided  upon  the  evidence  that  the  offense  charged 
in  the  complaint  had  been  committed,  and  that  there  was 
probable  cause  for  believing  the  defendants  guilty  of  such 
offense.  Each  defendant  refused  to  give  bail  for  liis  appear- 
ance before  the  municipal  court  of  Milwaukee  county  for 
trial,  whereupon  he  was  duly  committed  to  the  custody  of 
the  sheriff  of  such  county  to  await  such  trial.  A  commitment 
was  delivered  to  the  sheriff,  as  to  each  defendant,  all  being  in 
the  same  form. 

Thereafter  each  defendant,  on  a  petition  stating  the  pro- 
ceedings to  which  reference  has  been  made,  sued  out  of  the 
circuit  court  for  Milwaukee  county  a  writ  of  habeas  corpus 
to  test  the  legality  of  his  detention.  The  sheriff  of  the  county 
made  due  return  to  each  of  such  writs,  justifying  the  deten- 
tion by  the  commitment  placed  in  his  hands  as  before  stated. 

[Some  of  the  defendants  traversed  the  return  of  the  sheriff, 
alleging  that  the  proceedings  upon  which  his  detention  was 
based  were  illegal  and  void  and  beyond  the  jurisdiction  of 
the  committing  magistrate.  Others  demurred  to  the  return 
for  insufficiency.] 

The  court  then  decided  that  the  proceedings  which  resulted 
in  the  several  commitments  were  illegal,  because  the  facts 
alleged  in  the  complaint  did  not  constitute  a  criminal  offense; 
that  the  statute  under  which  the  prosecution  was  commenced 
covers  only  cases  where  the  purpose  of  the  combination  is  to 
do  such  an  injury  that  an  action  at  law  can  be  maintained  for 
damages,  against  the  members  of  the  combination,  in  case  its 


542    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

purpose  is  carried  out.  An  order  was  accordingly  entered  to 
discharge  each  of  the  defendants  from  custody.  Such  orders 
are  presented  here  for  review  by  writs  of  error,  as  before 
stated. 

ATARSHATJi,  J.  [after  disposing  of  certain  preliminary 
questions  and  concluding  that  the  complaint  admitted  of  a 
construction  which  would  satisfy  the  statute,  and  also  that 
there  was  some  proof  that  the  defendants  in  error  made  the 
agreement  to  maliciously  injure  the  Journal  Company  in  its 
business  as  charged,  proceeded  as  follows]  : 

We  are  next  to  consider  whether  it  was  such  an  injury  as 
satisfies  the  calls  of  the  statute.  Counsel  for  defendants  in 
error  say  it  was  not;  that  it  was  only  an  ordinary  agreement 
between  independent  persons  in  their  own  business,  to  main- 
tain prices  at  a  particular  level  for  the  promotion  of  their 
legitimate  interests;  that  such  a  combination  is  not  illegal  in 
the  sense  of  being  actionable  at  common  law ;  that  the  statute 
does  not  change  that,  or,  if  it  does,  that  it  is  unconstitutional. 

We  have  already  proceeded  beyond  some  elements  of  the 
above  somewhat  compound  proposition,  but  these  parts  to 
which  we  have  already  adverted  were  so  exhaustively  gone 
over  by  the  able  counsel  who  argued  the  case,  both  in  the 
main  argument  and  on  the  reargument  thereafter  accorded 
for  that  special  purpose,  that  we  will  give  some  further  atten- 
tion in  this  connection  to  what  has  already  been  referred  to 
incidentally. 

Assuming,  for  the  moment,  that  the  agreement  is  of  the 
nature  contended  for,  as  indicated,  and  that  the  statute  is 
aimed  at  such,  it  does  not  follow,  in  our  judgment,  that  enter- 
ing into  it  was  not  a  criminal  ofi'ense.  That  one  person,  acting 
by  himself,  or  many  in  combination,  may,  in  the  legitimate 
pursuit  of  their  own  business,  injure  the  business  of  a  rival 
even  to  the  extent  of  impoverishing  him  and  driving  hun  out 
of  the  field  of  industry  occupied  in  common,  leaving  hiin 
remediless  for  his  misfortune,  in  the  absence  of  a  statute  to 
the  contrary,  must  be  admitted.  National  and  state  legisla- 
tures have  dealt  with  that  subject  in  many  instances,  in  recent 
years,  and  uniformly  with  success  so  far  as  regards  consti- 
tutional limitations, — with  such  success,  in  fact,  that  the  man 


THE  COMIVION  LAW  543 

of  learning  must  be  recognized  as  one  of  courage  who  will 
attempt  at  this  late  day  to  challenge  legislative  power  in  that 
regard  on  constitutional  grounds.  The  time  seems  past  for 
that,  as  regards  combinations  of  individual  independent  in- 
terests, designed  to  remain  independent  for  most  purposes, 
but  to  act  in  combination  to  control  trade.  By  numerous  de- 
cisions of  the  highest  courts  in  this  country,  the  police  power 
incident  to  sovereignty  has  been  held  to  be  broad  enough  to 
permit  the  legislature  to  deal,  by  creating  civil  or  criminal 
liability,  or  both,  with  all  combinations  in  restraint  of  trade 
which  are  void  by  common-law  rules  on  grounds  of  public 
policy,  and,  within  reasonable  limits  to  be  set  by  courts  in  the 
light  of  constitutional  safeguards,  to  say  that  things  are 
contrary  to  public  policy  not  so  before,  to  legislate  against 
them  and  to  enforce  the  legislative  will  by  civil  or  criminal 
liability,  or  both: — within  the  broad  field  indicated,  to  regu- 
late or  prohibit  any  combination  of  the  kind  we  are  talking 
about,  formed  for  the  purpose  of  restraining  trade  or  disturb- 
ing those  natural  business  conditions,  where  every  individual 
is  supposed  to  be  free  to  contend  with  every  other  in  the 
regular  course  of  business.  We  are  speaking  here  of  inde- 
pendent interests  concerting  together  for  the  purpose  men- 
tioned. That  must  be  kept  in  mind.  These  questions  have 
been  so  firmly  settled  that  no  court  will  now  venture  to  do 
more  than  to  follow  what  has  been  decided.  Contracts  that 
operate  merely  in  restraint  of  trade,  such  as  it  is  contended 
the  one  in  question  was,  even  though  unreasonable,  were  not 
actionable  at  all  at  the  common  law.  They  were  void,  merely. 
The  courts  would  not  enforce  or  give  effect  to  them.  But 
new  conditions  have  arisen  creating  new  dangers,  or  intensi- 
fying old  ones  that  were  once  considered  so  trifling  as  to  pass 
unnoticed,  calling  for  new  restraints  and  new  remedies.  Who 
can  say  that  sovereign  power  has  been  so  surrendered  as  to 
be  left  incapable  of  dealing  with  that  subject.  Right  qr 
wrong,  those  dangers  have  been  considered  so  great,  and 
power  to  deal  with  them  so  ample,  that  legislation  has  gone 
to  the  length  we  have  indicated,  making  combinations  to  stifle 
independent,  individual  competition,  illegal  and  actionable, 
civilly  and  criminally,  all  upon  the  broad  ground  that  legis- 
lative  authority   exists   in   the   administration   of   the   police 


544    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

power,  to  regulate  or  prohibit  those  things  which  are  contrary 
to  public  policy  by  the  rules  of  the  common  law;  and  to  go 
further  and  determine,  in  the  light  of  new  conditions,  what 
is  detrimental  to  the  public  welfare,  and  to  legislate  accord- 
ingly. 

On  what  has  been  said,  the  following  of  many  authorities 
that  might  be  cited  are  in  point:  U.  S.  v.  Addyston  Pipe  & 
Steel  Co.,  29  C.  C.  A.  141,  46  L.  R.  A.  122;  U.  S.  v.  Trans- 
Missouri  Freight  Ass'n,  166  U.  S.  290,  41  L.  Ed.  1007;  Gibbs 
V.  McNeeley  (C.  C.)  102  Fed.  594;  Nester  v.  Brewing  Co.,  161 
Pa.  473,  24  L.  R.  A.  247;  People  v.  Sheldon,  139  N.  Y.  251, 
23  L.  R.  A.  221 ;  Jackson  v.  Stanfield,  137  Ind.  592,  23  L.  R.  A. 
588;  People  v.  Nussbaum  (Sup.)  66  N.  Y.  Supp.  129;  Leonard 
V.  Poole,  114  N.  Y.  371,  4  L.  R.  A.  728;  People  v.  Milk  Ex- 
change, 145  N.  Y.  267,  27  L.  R.  A.  437;  Ford  v.  Association, 
155  lU.  166,  39  N.  E.  651,  27  L.  R.  A.  298.  The  number  of 
eases  that  could  be  cited  on  this  subject  is  so  great  that  no 
attempt  has  been  made  to  do  more  than  collect  here  a  few 
that  contain  pretty  full  discussions  thereof.  A  study  of  them 
reveals  the  fact  that  the  power  of  public  opinion  in  favor  of 
preventing  combinations  to  stifle  individual  freedom  in  busi- 
ness and  the  sacrifice  of  those  benefits  that  are  popularly 
supposed  to  flow  from  free  competition,  has  led  to  legislation 
in  most  of  the  states  of  the  Union,  as  well  as  by  the  federal 
congress,  and  that  in  but  very  few  instances  has  such  an  en- 
actment met  the  bar  of  the  constitution  of  state  or  nation.  A 
late  work  that  treats  of  police  powers,  sums  up  the  subject 
here  under  discussion  thus: 

"It  is  believed  that  the  constitutionality  of  none  of  the 
numerous  anti-trust  statutes  has  been  successfully  questioned 
on  the  ground  that  they  infringed  the  personal  liberty  of 
contract,  in  punishing  civilly  or  criminally  the  entrance  into 
a  contract  or  combination  in  unreasonable  restraint  of  trade. 
That  such  contracts  and  agreements  are  void,  independently 
of  statute  and  at  the  common  law, — so  far,  at  least,  as  to 
justify  the  courts  in  refusing  to  enforce  them  or  in  any  other 
way  to  give  the  parties  to  them  the  aid  of  judicial  process  in 
protecting  and  enforcing  the  rights  of  parties,  which  grow 
out  of  such  agreements — has  been  too  long  the  settled  rule  of 
law,  to  admit  of  any  serious  question  now.    And  the  power  of 


THE  COMMON  LAW  545 

the  state  to  declare  such  contracts  unlawful  being  conceded,  it 
is  completely  within  the  discretion  of  the  legislature  to  deter- 
mine whether  such  unlawful  contracts  and  combinations  shall 
be  simply  ignored  by  the  courts  or  the  parties  to  them  be 
subjected  to  criminal  or  civil  liabilities."  1  Tied.  Cont.  of 
Pers.  &  Pl-op.  §  112. 

Coming  back  to  the  question  of  whether  the  malicious  in- 
jury which  the  complaint  charges  against  the  defendants  in 
error  is  such  an  injury  as  the  one  named  in  the  statute,  it 
seems  that  it  makes  little  difference  whether  we  view  the 
statute  as  merely  declaratory  of  the  common  law  or  as  in  the 
line  of  the  numerous  state  statutes  to  which  we  have  referred, 
condemning  combinations  in  restraint  of,  or  injurious  to, 
trade.  It  has  the  distinctive  element  of  malice  which  satisfies 
common-law  requirements  of  a  malicious  combination  to  in- 
jure, which  is  actionable  for  civil  damages  and  punishable  as 
a  criminal  offense  by  common-law  rules,  as  we  shall  see  later. 
Much  confusion  is  created  in  cases  of  this  kind  by  using  ex- 
pressions of  courts  made  on  one  state  of  facts  or  as  regards 
one  form  of  action,  to  support  a  conclusion  in  a  case  involving 
a  different  principle.  A  large  number  of  cases  are  cited  to 
our  attention  where  it  is  said  that,  if  an  act  committed  by  one 
is  not  actionable,  it  is  not  where  committed  by  many  acting  in 
concert.  The  fallacy  of  that,  as  applied  to  conspiracy  in  its 
criminal  aspect,  where  there  is  the  distinct  and  substantive 
wrong  of  intent  to  injure,  was  sufficiently  treated  by  this 
court  in  Martens  v.  Reilly  (decided  Jan.  8,  1901)  109  Wis. 
— .  Counsel  for  defendants  in  error,  however,  insist  upon 
that  doctrine  in  this  case,  citing  many  civil  cases  where  it 
has  some  application,  damages  being  the  gist  of  the  action, 
among  which  are  three  late  English  cases  that  deserve  careful 
consideration.  If  the  doctrine  of  those  cases,  as  settled  in  the 
last  of  them,  is  to  prevail,  we  must  all  revise  our  notions  of 
the  law  of  conspiracy,  and  the  books  must  be  rewritten.  The 
following  are  the  cases  referred  to:  Mogul  S.  S.  Co.  v.  Mc- 
Gregor, 23  Q.  B.  Div.  598,  decided  in  house  of  lords  and 
reported  in  [1892]  App.  Cas.  25;  and  Huttley  v.  Simmons 
[1898]  1  Q.  B.  Div.  181.  The  first  case  involved  a  combination 
to  monopolize  trade  at  the  expense  of  plaintiff,  but  no  element 
of  malice  was  found.     The  action  was  to  recover  damages. 

Kales  R.  of  T.  Vol.  1—35 


546    COIVIBINATIONS  AND  RESTRAINT  OF  TRADE 

In  that  situation  it  was  true  that  the  defendants  were  not 
liable  in  combination  if  one  of  them  would  not  have  been  had 
he  acted  alone.  The  interesting  feature  of  that  case  is  ab- 
sence of  malice.  When  first  decided  all  the  learned  judges 
who  wrote  upon  the  question  reached  the  conclusion  on  which 
the  judgment  of  the  court  was  entered,  upon  the  theory  that 
no  specific  intent  on  the  part  of  the  defendants  to  injure  the 
plaintiff  wrongfully,  no  malice,  was  disclosed  by  the  testimony. 
BowEN,  L.  J.,  said:  "Certain  kinds  of  conduct  not  criminal 
in  any  one  individual  may  become  criminal  if  done  by  com- 
bination among  several."  "A  combination  may  make  oppres- 
sive or  dangerous  that  which,  if  it  proceeded  only  from  a; 
single  person,  would  be  otherwise,  and  the  very  fact  of  the 
combination  may  show  that  the  object  is  simply  to  do  harm, 
and  not  to  exercise  one's  own  just  rights."  Fry,  L.  J.,  said: 
"I  lay  out  of  consideration,  in  this  case,  competition  used  as 
a  mere  engine  of  malice,  even  where  I  do  not  in  terms  repeat 
the  exception."  Lord  Hannen  said:  "I  know  of  no  restric- 
tion imposed  by  law  on  competition  by  one  trader  with  an- 
other, with  the  sole  object  of  benefiting  liimself.  I  consider 
that  a  different  case  would  have  arisen  if  the  evidence  had 
shown  that  the  object  of  the  defendants  was  a  malicious  one, 
namely,  to  injure  plaintiff's,  whether  they,  the  defendants, 
should  be  benefited  or  not."  The  Mogul  S.  S.  Co.  Case,  as 
appears  from  the  opinions  rendered  in  both  courts,  is  full  of 
expressions  showing  that  it  was  not  supposed  then  that  an 
act,  not  actionable  if  perpetrated  by  one,  could  not  be  made 
so  when  perpetrated  by  several  in  combination,  or  that  liberty 
to  form  business  combinations  to  promote  the  business  of  the 
members  thereof  in  the  free  course  of  trade,  applied  to  com- 
binations of  traders  in  the  same  calling  to  maliciously  injure 
a  rival.  The  free  course  of  trade  that  one,  or  a  number  in 
combination,  may  legitimately  enjoy,  does  not  include  the 
right  to  maliciously  injure  another  in  his  free  course  of  trade. 
Such  is  the  decision  in  the  Mogul  S.  S.  Co. 's  Case  on  its  face. 
We  should  say,  that  must  have  been  the  view  of  the  learned 
men  who  pronounced  the  opinions  in  that  case,  if  it  were  not 
for  what  followed  in  the  subsequent  case,  because  it  is  in 
harmony  with  many  decisions  cited  and  approved  in  the 
opinions,  a  good  instance  being  Gregory  v.  Brunswick,  6  Man. 


THE  COMMON  LAW  547 

&  G.  205,  where  it  was  held  that  preconcerted  hissing  of  an 
actor  for  the  purpose  of  injuring  him  in  his  profession,  was 
actionable.  That  and  many  other  cases  decided  on  the  same 
principle  were  approved.  If  we  say  that  such  principle  had 
prevailed  in  the  English  courts  for  two  centuries  prior  to  the 
Mogul  S.  S.  Co.  Case,  we  are  supported  by  the  lord  chancellor 
in  Allen  v.  Flood  [1898]  App.  Cas.  1.  There  the  element  of 
conspiracy  was  absent,  but  the  element  of  malice  was  present. 
The  majority  of  the  court  there,  contrary  to  what  was  said, 
inferentially  at  least,  and  what  all  of  the  judges  were  so 
careful  to  say  as  to  indicate  that  it  was  the  turning  point  in 
their  minds,  in  the  Mogul  S.  S.  Co.  Case,  decided  that  malice 
in  and  of  itself  could  not  render  that  a  ground  for  civil  liabil- 
ity which  without  it  would  be  lawful.  The  reasoning  to 
support  that  and  the  decision,  at  least  as  applied  to  a  con- 
spiracy with  malice,  is  out  of  harmony  with  right  and  justice, 
and  out  of  harmony  with  a  multitude  of  cases  that  had  been 
theretofore  decided  by  English  courts,  and  the  teachings  of 
those  who  had  built  and  filled  the  storehouses  of  learning 
from  which  all  draw,  outside  of  legal  opinions.  How  can  it 
be  harmonized  with  Gregory  v.  Brunswick,  where  the  con- 
spirators were  held  liable  because  of  their  malicious  purpose ; 
and  Clifford  v.  Brandon,  2  Camp.  358,  a  similar  case ;  or 
Garret  v.  Taylor,  Cro.  Jac.  567,  where  malicious  impeding  of 
workmen  was  held  actionable, — the  authority  of  which,  up  to 
Allen  V.  Flood,  had  never  been  questioned.  Those  simple 
cases  contain  all  the  principles  which  govern  this  case,  on  the 
particular  question  under  discussion. 

The  decision  in  Allen  v.  Flood  was  not  reached  by  any  great 
weight  in  number.  Lord  Watson,  who  delivered  the  main 
opinion  in  favor  of  it,  confessed  that  the  rule  established  was 
new  in  English  law.  The  lord  chancellor  labored  with  great 
vigor  to  stem  the  tide  of  what  he  considered  would  amount 
to  a  judicial  destruction  of  a  system  of  law,  on  an  important 
subject,  wliich  was  as  old  as  the  common  law.  He  said  tliat 
the  decision  overruled  the  views  of  the  most  distinguished 
judges  of  England  who  had  spoken  on  the  subject  for  200 
years;  that  it  was  a  departure  from  the  principle  that  had 
theretofore  guided  the  courts  in  the  preservation  of  individual 
liberty.     He  cited  numerous  expressions  of  the  character  of 


548    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

those  which  we  have  quoted  from  the  opinions  of  the  judges 
in  the  Mogul  S,  S.  Co.'s  Case,  and  said  that,  "if  the  elements, 
which  each  noble  lord  in  turn  pointed  out  did  not  exist  in  that 
ease,  had  in  fact  existed,  the  decision  would  have  been  the 
other  way."  Lord  Morris  said  that  the  decision  overturned 
''the  overwhelming  judicial  opinion  of  England."  In  that 
situation  one  can  discover  very  little  in  the  case  to  warrant 
adopting  it  and  extending  the  principle  thereof  to  a  combina- 
tion to  maliciously  injure. 

After  Allen  v.  Flood,  it  was  but  a  step  to  reach  Huttley  v. 
Simmons,  supra.  The  conclusion  there  was  in  harmony  with 
what  Lord  Halsbury  evidently  anticipated  would  be  the  final 
outcome  of  the  rule  he  so  vigorously  dissented  from.  The 
court  held,  combining  the  doctrine  of  the  Mogul  S.  S.  Co. 
Case  and  that  of  Allen  v.  Flood,  that  a  conspiracy  with  malice, 
to  do  an  act,  gives  a  right  of  action  only  when  the  act  agreed 
upon  to  be  done  and  in  fact  done,  would  have  been,  without 
pre-concert  actionable  as  a  civil  injury;  because  an  act  lawful 
without  malice  is  not  made  unlawful  by  the  addition  of  the 
element  of  malice. 

While  it  is  true  that  the  doctrine  of  the  cases  referred  to, 
even  up  to  the  final  conclusion  in  Huttley  v.  Simmons,  has,  to 
some  extent,  influenced  the  judicial  policy  of  this  country,  it 
is  safe  to  say  that  the  teachings  thereof  have  not,  up  to  this 
time,  been  adopted  here  in  any  material  degree.  In  courts 
where  it  has  been  partially  adopted  there  has  often  been 
most  vigorous  dissent,  as,  for  example,  Passaic  Print  Works 
V.  Ely  &  Walker  Dry-Goods  Co.,  44  C.  C.  A.  426,  105  Fed.  163. 
Mr.  Eddy,  in  his  work  on  Combinations,  published  the  present 
year,  after  a  very  careful  review  of  all  of  those  cases,  said, 
speaking  of  Huttley  v.  Simmons: 

"If  this  decision  be  sound,  there  is  little  indeed  to  the  law 
of  civil  conspiracy.  The  conclusion  reached  is  logically  cor- 
rect if  the  premises  be  admitted.  If  the  proposition  is  sound 
that  a  conspiracy  to  do  certain  acts  gives  a  right  of  action 
only  where  the  acts  agreed  to  be  done,  and  in  fact  done,  would 
have  involved  a  civil  injury  to  the  plaintiff  regardless  of  any 
confederation,  then  the  combination  is  entirely  immaterial, 
and  the  entire  law  of  civil  conspiracy  is  a  superfluous  discus- 
sion.    .     .     .     But,    notwithstanding    the    decision    in    Huttley 


THE  COI^IMON  LAW  549 

V.  Simmons,  we  believe  the  law  for  England,  and  certainly  for 
the  United  States,  to  be  well  settled  to  the  effect  that  parties 
to  a  conspiracy  may  be  liable  for  damages  occasioned  by  acts 
which,  if  done  by  individuals  severally,  would  not  give  rise 
to  a  cause  of  action."     Section  503. 

In  order  to  well  understand  that  characterization,  one  must 
know  that,  after  a  review  of  numerous  cases,  the  author  de- 
duced the  conclusion  that  the  element  of  malice,  the  intent  to 
injure  on  the  part  of  several  acting  in  combination,  will  make 
that  actionable  that  would  not  othermse  be  so. 

This  court  has  often  held  that  an  executed  conspiracy  to 
inflict  a  malicious  injury  is  actionable.  To  hold  otherwise 
now  and  follow  Huttley  v.  Simmons,  would  be  to  overrule 
these  cases.  Bratt  v.  Swift,  99  "Wis.  579;  Association  v.  Nie- 
zerowski,  95  Wis.  129,  37  L.  R.  A.  127;  Gatzow  v.  Buening, 
106  Wis.  1.  The  great  weight  of  authority,  almost  all  author- 
ity, is  to  the  same  effect.  We  give  a  few  citations.  1  Hawk. 
P.  C.  72,  §  2 ;  State  v.  Stewart,  59  Vt.  273 ;  Carew  v.  Ruther- 
ford, 106  Mass.  14;  Ertz  v.  Exchange  Co.  (Minn.)  81  N.  W. 
737 ;  State  v.  Buchanan,  5  Har.  &  J.  317 ;  Com.  v.  Waterman, 
122  Mass.  57;  Farmers'  Loan  &  Trust  Co.  v.  Northern  Pac.  R. 
Co.  (C.  C.)  60  Fed.  803;  State  v.  Norton,  23  N.  J.  Law,  33; 
State  V.  Glidden,  55  Conn.  46;  Sherry  v.  Perkins,  147  Mass. 
212;  Smith  v.  People,  25  111.  17;  In  re  Crump,  84  Va.  927; 
Doremus  v.  Hennessy,  176  111.  608. 

In  the  last  case  above  cited,  Phillips,  J.,  speaking  for  the 
court,  summed  up  the  subject  under  discussion  thus: 

"Lawful  competition  that  may  injure  the  business  of  an- 
other, even  though  successfully  directed  to  driving  that  other 
out  of  business,  is  not  actionable.  Nor  would  competition  of 
one  set  of  men  against  another  set,  carried  on  for  the  purpose 
of  gain,  even  to  the  extent  of  intending  to  drive  from  business 
that  other  set  and  actually  accomplishing  that  result,  be 
actionable  unless  there  was  actual  malice.  'Malice,'  as  here 
used,  does  not  merely  mean  an  intent  to  harm,  but  means  an 
intent  to  do  a  wrongful  harm  and  injury.  An  intent  to  do  a 
wrongful  harm  and  injury  is  unlawful,  and  if  a  wrongful  act 
is  done  to  the  detriment  of  the  right  of  another,  it  is  malicious ; 
and  an  act  maliciously  done,  with  the  intent  and  purpose  of 
injuring  another,  is  not  lawful  competition." 


550    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

That  expresses  the  common-law  doctrine  and  the  one  that 
prevails  here.  How  contrary  it  is  to  Huttley  v.  Simmons 
appears  without  a  suggestion. 

The  late  English  doctrine  seems  not  to  be  one  of  those 
changes  which  come  from  mere  development;  it  is  a  revolu- 
tion. The  pressure  of  desire  for  freedom  to  combine  to 
monopolize  trade,  and  render  combinations  successful  by  the 
malicious  destruction  of  the  business  of  competitors,  is  not 
liable  to  find  favor  with  the  courts  in  this  country,  especially 
at  a  time  when  public  opinion  to  the  contrary  is  so  strong  that 
much  of  the  time  of  legislatures  is  occupied  in  inventing  new 
methods  of  preventing  combinations  which  are  perfectly  law- 
ful by  rules  of  the  common  law.  The  ideas  pressed  upon  the 
attention  of  the  court  in  this  case  have  been  pressed  upon 
every  court  in  the  land  where  opportunity  therefor  has  been 
presented  since  the  decision  in  the  Mogul  S.  S.  Co.  Case.  So 
far  as  then  developed  they  were  presented  in  Farmers'  Loan 
&  Trust  Co.  V.  Northern  Pac.  R.  Co.,  supra,  and  rejected,  the 
learned  circuit  judge  who  wrote  the  opinion  quoting  with 
approval  from  Com.  v.  Carlisle,  Brightly,  N.  R  36,  the  fol- 
lowing : 

"It  will  therefore  be  perceived  that  the  motive  for  com- 
bining, or,  what  is  the  same  thing,  the  nature  of  the  object  to 
be  attained  as  a  consequence  of  the  lawful  act,  is,  in  this  class 
of  cases,  the  discriminating  circumstance.  Where  the  act  is 
lawful  for  an  individual,  it  can  be  the  subject  of  a  conspiracy 
when  done  in  concert  only  where  there  is  a  direct  intention 
that  injury  shall  result  from  it,  or  where  the  object  is  to 
benefit  the  conspirators  to  the  prejudice  of  the  public  or  the 
oppression  of  individuals,  and  where  such  prejudice  or  op- 
pression is  the  natural  and  necessary  consequence." 

Frequent  recurrence  to  the  fundamental  principles  of  action- 
able conspiracy  is  essential  to  keep  from  ingrafting  upon  a 
judicial  system  something  which  is  entirely  new,  to  meet  the 
desires  of  those  who  arrogate  to  themselves  the  right,  not 
only  to  monopolize  trade  or  effort  in  some  particular  field,  but, 
under  the  guise  of  fair  trade,  to  control  or  destroy  the  busi- 
ness of  competitors  without  any  expectation  of  profit  to  them- 
selves,— to  wrongfully  harm  such  competitors  merely  because 
they  insist  upon  individual  right  to  conduct  individual  busi- 


THE  COMMON  LAW  551 

ness  in  one's  own  way.  A  combination  with  the  malicious 
purpose  indicated  is  an  actionable  wrong.  Had  it  not  been 
for  section  4568,  Rev.  St.  1898,  adding  to  the  common-law 
essentials  of  an  indictable  conspiracy  the  necessity  for  an 
overt  act,  section  4466a  would  have  been  unnecessary  to  en- 
able the  court  to  punish,  criminally,  such  wrongs.  That  is  a 
mere  declaration  of  the  common  law.  It  operates  as  a  repeal, 
by  implication,  of  section  4568  so  far  as  otherwise  a  specific 
overt  act  would  be  required  to  render  a  malicious  conspiracy, 
to  injure  the  trade,  business,  reputation  or  profession  of  an- 
other, an  offense.  The  old  doctrine,  with  its  ancient  meaning, 
should  be  referred  to  in  construing  section  4466a.  An  action- 
able conspiracy  is  a  combination  of  two  or  more  persons  for 
the  purpose  of  accomplishing  a  criminal  or  unlawful  object 
by  criminal  or  unlawful  means,  or  a  lawful  object  by  criminal 
or  unlawful  means.  One  may,  through  purely  malicious  mo- 
tives, attract  to  himself  another's  customers  and  the  injury 
be  so  slight  in  contemplation  of  law  that  "De  minimis  non 
curat  lex"  applies;  but  when  he  unites  others  with  him  to 
maliciously  injure  the  business  of  another  for  the  mere  gratifi- 
cation, in  whole  or  in  part,  of  a  desire  to  inflict  such  injury, 
the  condition  of  there  being  the  combined  force  of  many 
directed  towards  another,  characterized  by  the  element  of 
malice,  renders  the  act  of  combining  for  the  particular  pur- 
pose unlawful  and  a  substantive  offense,  in  the  absence  of  a 
statute  requiring  some  additional  element.  As  said,  in  effect, 
in  Farmers'  Loan  &  Trust  Co.  v.  Northern  Pac.  R.  Co.,  supra, 
the  union  of  individual  forces  by  agreement,  to  accomplish  the 
injury,  gives  to  such  agreement  the  character  of  a  purpose  to 
reach  the  end  in  view  by  violence,  and  the  accomplishment 
thereof  the  character  of  a  purpose  effected  by  violence.  The 
law  never  has  and  probably  never  will  leave  an  individual, 
or  class  of  individuals,  remediless  against  such  a  wrong. 

This  opinion  has  been  carried  to  great  length.  The  justifi- 
cation therefor,  if  there  is  any,  lies  in  the  importance  of  the 
case  and  the  numerous  questions  presented  for  decision.  All 
of  such  questions,  as  regards  the  character  of  the  wrong  com- 
plained of,  from  the  standpoint  of  counsel  for  defendants  in 
error,  have  their  best  support  in  the  three  English  cases  to 
which  we  have  particularly  referred.     A  full   discussion  of 


552    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

them,  as  it  seems,  leaves  little  more  that  need  be  said.  As 
indicated  at  the  commencement,  a  long  opinion  was  unavoid- 
able if  reference  was  to  be  made  even  briefly  to  the  many 
points  presented  in  the  voluminous  briefs  of  counsel.  As  it 
is,  there  are  some  to  which  we  have  referred  only  briefly, 
though  it  is  believed  that  all  have  been  covered  in  principle. 
Our  conclusion  is  this:  The  term  "malicious  injury,"  as  used 
in  the  statute,  is  synonymous  with  that  term  at  the  common 
law;  it  refers  to  the  infliction  of  a  wrongful  injury  intention- 
ally ;  such  a  wrong  is  actionable  even  though  the  same  purpose, 
if  formed  and  executed  by  an  individual,  would  not,  in  con- 
templation of  lav/,  be  considered  sufficiently  serious  to  call 
successfully  for  legal  redress.  There  is  nothing  in  this  mili- 
tating at  all  against  the  right  of  individuals  to  combine  and 
associate  together  for  the  purpose  of  promoting  their  indi- 
vidual welfare  in  any  legitimate  way.  It  strikes  only  at  the 
assertion  of  a  right  of  combining  to  resort  to  the  use,  as  a 
single  power,  of  the  individual  abilities  and  resoui^ces  of  two 
or  more  to  wrongfully  accomplish  harm  to  another  in  the  line 
of  those  things  mentioned  in  the  statute.  It  is  in  harmony 
with  the  doctrine,  so  definitely  stated  by  Baron  Brammel  in 
Reg.  V.  Druitt,  10  Cox,  Cr.  Cas.  593,  that  it  has  often  been 
quoted  by  coui'ts  and  text-writers  and  nowhere  rejected: 
"The  liberty  of  a  man's  mind  and  will  to  say  how  he  shall 
bestow  himself  and  his  means,  his  talents  and  his  industry,  is 
as  much  a  subject  of  the  law's  protection  as  that  of  his  body ;" 
and  "if  any  set  of  men  agree  among  themselves  to  coerce  that 
liberty  of  mind  and  thought  by  compulsion  and  restraint,  they 
are  guilty  of  a  criminal  offense," 

By  the  Court. — The  orders  of  the  circuit  court  dis- 
charging the  defendants  in  error  are  severally  reversed  and 
the  cause  is  remanded  with  directions  to  remand  them  to  the 
sheriff  of  Milwaukee  county ."^^ 

Dodge,  J.,  took  no  part. 

78 — See  Hawarden  v.  Youghiogh-  to  deal  with  particular  retaUers  in 
eny  &  Lehigh  Coal  Co.,  Ill  Wis.  545,  order  to  put  them  out  of  business). 
549-551     (Coal    wholesalers    refused 


THE  COMMON  LAW  553 

PARK  &  SONS  CO.  V.  NATIONAL  DRUGGISTS'  ASS'N 
(Court  of  Appeals  of  New  York,  1903.    175  N.  Y.  1.) 

HAIGHT,  J.  The  question  presented  for  review  is  as  to 
whether  the  complaint  states  facts  sufficient  to  constitute  a 
cause  of  action. 

The  relief  sought  by  the  plaintiff  is  an  adjudication  that 
the  resolutions,  agreements,  plans,  and  modes  for  the  con- 
ducting of  the  business  of  the  sale  of  proprietary  medicines 
by  the  National  Wholesale  Druggists'  Association  are  illegal, 
and  that  an  injunction  issue,  restraining  the  members  of  the 
association  from  continuing  to  make  efforts  to  induce  any 
manufacturer  or  proprietor  of  what  are  known  as  patent  or 
proprietary  medicines  from  adopting  the  rebate  or  contract 
plan  for  the  sale  of  their  goods,  or  of  continuing  such  plan  if 
they  have  previously  adopted  the  same. 

The  complaint  is  very  voluminous,  and  I  have  not  attempted 
to  give  even  a  fair  synopsis,  for  that  would  necessarily  cover 
many  pages,  and  I  have  not  deemed  it  necessary,  for  it  appears 
to  me  that  the  rights  of  the  parties  must  depend  upon  a  few 
controlling  facts,  which  may  be  briefly  stated. 

It  appears  from  the  allegations  of  the  complaint  that  the 
matter  in  controversy  has  reference  to  the  sale  by  manufac- 
turers of  those  particular  medicines  or  remedies  covered  by 
trade-marks,  copyrights,  or  patents,  which  secure  to  the  manu- 
facturer or  proprietor  the  exclusive  right  to  manufacture  and 
sell  the  same.  These  medicines  are  known  as  "proprietary 
goods,"  and  their  manufacture  and  sale  are  confessedly  under 
the  control  and  management  of  the  owner  or  manufacturer, 
who  may  fix  his  own  price,  and  adopt  such  plan  for  the  sale 
thereof  as  he,  in  his  judgment,  may  determine.  At  one  time 
the  sale  of  these  goods  was  largely  made  through  traveling 
sales  agents,  who  worked  upon  commissions,  and  supplied  the 
goods  to  the  consumer  or  retailer.  Later  on  they  were  sold 
largely  through  the  druggists,  but  many  of  the  manufacturers 
did  not  maintain  a  uniform  price.  They  would  supply  goods 
to  some  of  the  wholesalers  upon  more  favorable  terms  than 
to  others;  thus  permitting  large  dealers  to  make  a  profit, 
while  a  great  number  of  the  smaller  druggists  found  the  hand- 
ling of  proprietary  goods  unprofitable.     This  resulted  in  the 


554    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

organization  of  the  National  Wholesale  Druggists'  Associa- 
tion, an  unincorporated  body,  which  in  1882  and  1883  repre- 
sented 90  per  cent,  of  the  wholesale  jobbing  trade  of  the 
United  States.  At  a  meeting  of  this  association  a  plan  was 
devised  and  adopted  for  the  conduct  of  the  business  of  the 
sale  of  proprietary  goods,  which  was  in  the  form  of  a  petition 
addressed  to  the  proprietors,  asking  them  to  fix  a  uniform 
jobbing  price  for  fixed  quantities,  and  also  a  selling  price  by 
the  druggists,  which  they  were  to  agree  to  maintain,  and  that 
the  druggists  should  be  allowed  the  difference  between  the 
jobbing  and  the  selling  price  as  their  profit  or  rebate,  which 
they  asked  should  be  not  less  than  10  per  cent.;  the  pro- 
prietors defraying  the  expenses  of  boxing  and  freight  to  the 
nearest  transportation  station  of  the  buyer.  It  is  alleged  that 
a  large  number  of  the  proprietors  consented  to  this  arrange- 
ment, and  adopted  the  plan  suggested  by  the  wholesale  drug- 
gists. And  this  mode  of  conducting  the  business  appears  to 
have  been  continued  until  the  December  meeting  of  the  asso- 
ciation, in  1893,  at  which  time  a  committee,  to  whom  the 
Detroit  plan,  so  called,  had  been  referred,  reported,  among 
other  things,  the  following:  "That  in  order  to  strengthen 
and  render  this  plan  more  effective,  it  is  respectfully  recom- 
mended that  proprietors  accept  orders  for  full  quantities  with 
rebate,  discounted  only  from  regular  houses  recognized  as  be- 
longing to  the  number  who  will  faithfully  observe  the  prices 
and  conditions  established  by  the  manufacturers."  This  ap- 
pears to  have  been  adopted  and  was  acquiesced  in  by  the  man- 
ufacturers, and  became  the  plan  under  which  the  business  was 
conducted  at  the  time  this  action  was  commenced. 

It  further  appears  from  the  allegations  of  the  complaint 
that  the  plaintiff  never  acquiesced  in  this  plan  of  conducting 
the  business,  but  always  insisted  on  its  right  to  sell  proprietary 
goods  at  such  price  or  prices  as  it  saw  fit,  in  its  discretion,  and 
would  not  be  bound  by  the  price  established  by  the  manu- 
facturers; that  thereupon  the  manufacturers  refused  to  sell 
or  ship  goods  to  the  plaintiff,  and  it  was  compelled  to  procure 
goods  from  other  druggists ;  that  the  National  Wholesale  Drug- 
gists' Association  caused  the  plaintiff's  premises  to  be  watched 
by  spies  or  detectives,  and  that  they  made  reports  to  the  man- 
ufacturers of  the  druggists  who  purchased  goods  of  the  pro- 


THE  CO:\IMON  LAW  555 

prietors  and  caused  them  to  be  delivered  at  the  plaintiff's 
premises;  and  that  the  association  also  furnished  the  man- 
ufacturers with  a  list  of  all  of  the  druggists  throughout  the 
United  States  who  were  willing  to  be  controlled  by  the  con- 
tract plan.  The  complaint  then  alleges  that  the  defendants 
* '  were  combining  and  conspiring  to  obtain  an  exclusive  control 
of  the  wholesale  and  jobbing  trade,  as  between  the  manufac- 
turer and  the  retailer,  in  all  classes  of  patent  medicines  or 
proprietary  goods,  and  to  regulate  and  control  the  methods 
upon  which  the  said  trade  shall  be  carried  on  throughout  the 
entire  United  States,  and  to  control  the  prices  at  which,  and 
the  discounts,  allowances  for  freight,  and  the  terms  of  credit 
upon  which,  the  said  proprietary  goods  shall  be  sold  to  the 
various  retail  druggists  throughout  the  United  States,  and  to 
destroy  and  prevent  any  and  all  competition  between  the  said 
wholesale  and  jobbing  druggists  in  the  wholesale  and  jobbing 
trade  in  said  proprietary  goods,  and  limit  and  restrict  the 
business  of  each  of  the  wholesale  and  jobbing  druggists,  or 
such  of  them  as  are  in  one  locality,  to  certain  exclusive  terri- 
tory, tributary  or  proximate  to  each  of  them,  respectively." 

The  demurrer  is  an  admission  of  the  facts  alleged,  but  not 
of  the  conclusions  of  law.  The  allegations  just  above  quoted 
I  understand  to  be  conclusions  of  law  drawn  from  the  allega- 
tions of  fact  alleged  in  the  complaint,  and  are  not  therefore 
admitted  by  the  demurrer.  It  therefore  becomes  necessary 
to  determine  whether  the  plan  for  the  conducting  of  the  busi- 
ness of  the  sale  of  proprietary  goods  adopted  by  the  associa- 
tion, and  which  it  requested  the  proprietors  or  manufacturers 
to  adopt  and  carry  out,  is  lawful.  The  question  thus  presented 
is  of  considerable  importance.  The  plan,  as  we  have  seen,  in 
its  substantial  features,  has  been  in  operation  nearly  20  years, 
and  in  its  final,  completed  form,  nearly  10  years.  This  plan, 
as  I  understand,  is  not  one  confined  to  the  sale  of  proprietary 
medicines,  but  is  one  that  has  been  adopted  by  many  manu- 
facturers of  merchandise  and  other  goods  where  manufacturers 
have  established  a  trade-mark,  and  have  gained  a  reputation 
which  they  wish  to  maintain  throughout  the  country  for  char- 
acter, quality,  and  durability  of  the  goods  which  they  manu- 
facture. They  have  consequently  established  prices  at  which 
their  goods  shall  be  sold  to  the   consumer,  and  require  all 


556    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

wholesale  and  retail  dealers  to  supply  the  consumer  at  the 
price  list  established.  The  decision,  therefore,  reached  herein, 
may  largely  affect  the  plan  of  conducting  business  in  other 
articles  of  commerce. 

It  is  said  that  the  National  Wholesale  Druggists'  Associa- 
tion was  organized  and  continued  for  the  purpose  of  monopo- 
lizing and  controlling  the  business  of  the  wholesale  druggists 
and  jobbers  in  the  sale  of  proprietary  or  patent  medicines  in 
the  United  States.  The  association  doubtless  was  organized 
and  continued  for  the  purpose  of  devising  and  procuring  to 
be  carried  into  effect  a  plan  for  the  sale  of  such  goods  through- 
out the  United  States,  which  would  do  away  with  the  neces- 
sity of  maintaining  traveling  sales  agents,  and  which  would 
secure  to  the  dealers  a  uniform  commission  for  the  handling 
of  the  goods;  but  I  do  not  understand  that  this  was  the 
establishing  of  a  monopoly  on  the  part  of  the  members  of  the 
association,  for,  under  the  plan  adopted,  every  dealer  has  the 
right  to  purchase  goods  from  the  manufacturers  upon  the 
same  terms  as  the  members  of  the  association,  with  the  right 
to  the  same  rebate  or  commissions  upon  complying  with  the 
requirements  of  the  manufacturers  with  reference  to  follow- 
ing their  price  list  in  making  sales  of  goods.  The  members  of 
the  association  clearly  had  the  right  to  work  for  their  own 
interests.  They  had  the  right  to  devise  and  adopt  a  plan  for 
the  conduct  of  the  business  in  which  they  could  make  a  com- 
mission or  a  profit,  so  long  as  they  did  not  unlawfully  inter- 
fere with  the  rights  of  others.  They  had  the  right  to  petition 
the  manufacturers  to  adopt  the  plan  devised  by  them,  and  to 
support  their  petition  with  all  of  the  arguments  and  per- 
suasions that  they  could  bring  to  bear,  so  long  as  they  did  not 
resort  to  threats  or  intimidation.  The  proprietors,  having  the 
exclusive  right  to  manufacture  and  sell  their  goods,  had  the 
right  to  adopt  such  plan  with  reference  to  the  disposal  thereof 
as  they  saw  fit ;  and  if  they  became  convinced  that  the  contract 
or  rebate  plan,  so  called,  was  more  advantageous  to  them,  and 
more  fair  and  just  to  the  public,  by  establishing  a  uniform 
price  in  all  sections  of  the  country,  they  had  the  right  to  adopt 
the  same,  and  no  one  could  complain. 

Nor  does  the  plan  appear  to  me  to  be  in  restraint  of  trade. 
It  is  true  that  it  does  away  with  the  competition  among  dealers 


THE  COMMON  LAW  557 

as  to  prices,  but  it  creates  no  restriction  upon  them  as  to  the 
quantities  that  they  may  be  able  to  sell,  or  the  territory  within 
which  they  may  confine  their  transactions ;  but  upon  the  ques- 
tion of  prices  we  must  bear  in  mind  that  the  goods  are  covered 
by  patent  rights  and  trade-marks,  which  give  the  proprietors 
the  exclusive  right  of  specifying  prices  at  which  the  articles 
shall  be  sold,  and,  following  this,  the  right  also  to  require 
dealers  to  maintain  the  prices  specified.  The  plan  does  not 
operate  to  restrict  sales  in  any  localities,  but  contemplates  a 
ready  method  of  distributing  the  goods  throughout  the  entire 
country.  It  is,  in  effect,  the  creating  of  an  agency  on  the 
part  of  the  proprietors,  by  which  every  druggist  throughout 
the  United  States  may  receive  the  goods  and  dispose  of  them 
as  agents  of  the  principal,  receiving  the  commissions  agreed 
upon  therefor. 

Is  this  plan  against  public  policy?  An  active  competition 
and  rivalry  in  business  is  undoubtedly  conducive  to  the  public 
welfare,  but  we  must  not  shut  our  eyes  to  the  fact  that  com- 
petition may  be  carried  to  such  an  extent  as  to  accomplish  the 
financial  ruin  of  those  engaged  therein,  and  thus  result  in  a 
derangement  of  the  business,  an  inconvenience  to  consumers, 
and  in  public  harm.  While  public  policy  demands  a  healthy 
competition,  it  abhors  favoritism,  secret  rebates,  and  unfair 
dealing,  and  commends  the  conduct  of  business  in  such  a  way 
as  to  serve  all  consumers  alike.  That  this  is  the  tendency  of 
modern  times  is  evident  from  the  recent  discussions  and  legis- 
lation upon  the  subject  of  interstate  commerce.  One  of  th^ 
cardinal  and  chief  principles  of  the  plan  adopted  is  the  estab- 
lishing of  a  uniform  price  by  proprietors,  which  necessitates 
the  service  of  all  persons  alike  throughout  the  United  States; 
the  proprietors  subjecting  themselves  to  the  extra  expense  for 
freight,  etc.,  in  remote  sections  of  the  country.  I  can  discover 
nothing  in  this  which  is  detrimental  to  the  public  policy  of 
the  country.  The  right  would  certainly  not  be  denied  to  the 
manufacturer  of  a  given  remedy  to  adopt  the  rule  that  he 
would  only  sell  it  to  the  jobbers  of  the  country  at  a  certain 
long  price,  and  would  not  allow  a  discount  of  10  per  cent, 
where  they  refused  to  maintain  his  price.  In  other  words, 
the  manufacturer  says  to  the  jobbers  of  the  country:  "-I 
manufacture  a  medicine  that  I  wiU  sell  for  one  dollar  a  bottle, 


558    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

and  it  is  my  desire  that  it  shall  be  sold  at  that  price  per  bottle 
throughout  the  country.  If  you  will  take  consignments  of  this 
medicine  from  me,  billed  to  you,  at  that  price  per  bottle,  I  will 
allow  you  a  rebate  of  ten  per  cent. ;  and,  if  I  find  that  you  are 
selling  at  a  lower  price  than  billed  to  you,  I  will  allow  no 
rebate.  If  this  arrangement  is  not  satisfactory  to  you,  I  pre- 
fer to  keep  my  manufactured  stock  on  hand.  These  are  the 
only  conditions  under  which  I  will  ship  my  manufactured 
article. ' ' 

Surely  there  is  nothing  in  this  approaching  restraint  of 
trade  or  the  violation  of  the  principle  of  public  policy.  It  is 
simply  allowing  a  man  to  do  what  he  will  with  his  own. 

I  do  not  understand  that  the  complaint  charges  that  the 
manufacturers  were  compelled  to  adopt  the  plan  by  reason  of 
threats  or  intimidation  on  the  part  of  the  members  of  the 
association.    It  is  true  that  the  complaint  contains  the  allega- 
tion, repeated  a  number  of  times,  to  the  effect  that  the  pro- 
prietors or  manufacturers  were  prevented  from   selling  the 
plaintiff  proprietary  goods  for  the  reason  that  they  wished  to 
protect   themselves   "with   the   wholesale   and  jobbing   drug- 
gists," and  also  that  at  one  of  the  meetings  of  the  association 
the  committee  on  proprietary  goods  reported  that,  with  a  few 
exceptions,   the  proprietors   of  all  the   prominent  proprietary 
medicines  had  adopted  the  contract  or  rebate  plan  for  the  sale 
of  their  goods,  and  then  concluded  its  report  with  the  recom- 
mendation "that  continued  and  untiring  opposition  be  shown 
to  the  sale  of  the  articles  of  those  proprietors  who  do  not 
adopt  said  contract  or  rebate  plan  for  the  sale  of  their  goods, 
or  who  withdraw  from  the  plan."     There  is  no   allegation, 
however,  that  this  resolution  was  served  upon  the  proprietors, 
or  was  otherwise  presented  to  them.     The  first  allegation  al- 
luded to  does  not,  as  I  understand  it,  amount  to  a  threat,  when 
taken  in  connection  with  the  other  allegations  of  the  complaint 
with  reference  to  the  plan  devised  for  the  conduct  of  the  busi- 
ness.   The  proprietors  might  well  deem  it  to  be  for  their  best 
interests  to  act  in  accord  with  the  wishes  of  the  druggists, 
rather  than  those  of  the  plaintiff.    As  to  the  second  allegation, 
untiring  opposition  was  to  be  continued  against  the  sale  of 
articles  of  proprietors  who  did  not  accept  the  contract  plan, 
or,  in  other  words,  to  the  sale  of  proprietary  goods  under  the 
old  system.     I  do  not  understand  that  by  this  allegation  it 


THE  COMMON  LAW  559 

was  intended  to  charge  that  the  plan  adopted  prohibited  drug- 
gists from  dealing  with  proprietors  or  manufacturers  who  did 
not  adopt  the  contract  plan  with  reference  to  the  sale  of  pro- 
prietary goods,  for,  under  other  allegations  of  the  complaint, 
it  appears  that  the  failure  of  a  manufacturer  to  adopt  the  plan 
simply  left  his  goods  upon  the  unrestricted  list,  for  which 
druggists  could  contract  in  such  manner  as  they  saw  fit.  This 
is  apparent  from  the  resolution  adopted  by  the  association  at 
its  Washington  meeting  in  1890. 

Is  there  any  boycott  of  the  plaintiff?  It  is  true,  many  of 
the  proprietors  refused  to  sell  to  the  plaintiff  proprietary 
goods  except  at  the  long  price,  which  I  understand  to  be  the 
selling  price.  They  have  refused  to  allow  it  commissions  or  a 
rebate  upon  the  goods  purchased,  but  this  refusal  is  based 
upon  the  ground  that  the  plaintiff  refused  to  sell  at  the  prices 
fixed  by  the  proprietors.  The  plaintiff  can  at  any  time  avail 
itself  of  the  right  to  purchase  upon  the  contract  plan  by  com- 
plying with  the  requirements  of  the  proprietors.  The  reply 
made  by  one  of  the  proprietors  to  a  letter  of  John  D.  Park  & 
Sons  under  date  of  January  25,  1889,  annexed  to  and  made  a 
part  of  the  complaint,  answers  this  question  so  completely  that 
I  here  repeat  it:  "We  think  you  are  in  error  in  calling  the 
action  of  the  association,  or  the  action  of  any  one  of  its  mem- 
bers, 'boycotting.'  A  boycott  means  to  refuse  to  sell  or  do 
business  with  a  concern,  and  to  prevent  anybody  else  from 
doing  business  with  a  concern  on  any  conditions.  This  is  not 
the  attitude  of  the  association  with  you.  The  association  has 
implored  you  over  and  over  again  to  abide  by  your  contracts 
and  sell  goods  as  your  neighbors  do,  and  you  have  distinctly 
defied  them  and  told  them  that  you  would  do  just  exactly  as 
you  liked.  There  is  no  'boycott'  in  this,  good  friends,  and 
nobody  knows  it  better  than  you  do;  and  you  also  know  that, 
even  if  you  choose  to  call  it  a  boycott,  you  can  end  the  boycott 
in  twenty-four  hours  by  simply  agreeing  when  you  sign  a  docu- 
ment that  you  will  keep  it." 

Complaint  is  made  with  reference  to  the  watching  or  spying 
upon  plaintiff's  business.  All  there  is  of  this  is  the  watching 
for  the  purpose  of  determining  who  the  druggists  were  that 
furnished  the  plaintiff'  with  proprietary  goods  in  violation  of 
the  contract  plan  under  their  agreements  with  the  proprietors. 


560    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

I  think  there  is  nothing  in  this  calling  for  the  intervention  of 
a  court  of  equity.  The  whole  success  of  the  plan  adopted  for 
conducting  the  business  depended  upon  the  faithful  observ- 
ance of  the  contract  of  the  druggists  with  the  proprietors,  for 
whom  they  were  acting  as  agents.  If  one  could  be  permitted 
to  violate  his  contract,  it  would  seriously  prejudice  all  the 
dealers  who  lived  up  to  the  provisions  of  their  contract,  and 
carried  it  into  execution  in  good  faith.  As  was  said  in  the 
letter  of  Parke  Davis  &  Co.  to  plaintiff's  predecessor  under 
date  of  February  12,  1889:  "The  contract  in  force  between 
us  and  the  members  of  the  Wholesale  Drug  Association  dur- 
ing the  three  years  prior  to  1887  was  objectionable  to  many 
because  of  the  opportunities  offered  to  those  so  disposed  for 
an  evasion  of  its  provisions;  thus,  those  who  lived  up  rigidly 
and  honestly  to  their  agreement  were  made  to  suffer  for  the 
benefit  of  those  disposed  to  regard  their  agreement  and  prom- 
ises simply  as  a  means  for  taking  advantage  of  others  who 
fulfilled  their  agreements." 

I  am  thus  brought  to  a  consideration  of  the  reasons  for 
objecting  to  the  plan  by  the  plaintiff.  As  stated  in  the  allega- 
tions of  the  complaint,  they  are  as  follows :  ' '  That  all  of  the 
said  manufacturers  and  proprietors  who  have  adopted  the 
said  rebate  or  contract  plan  for  the  sale  of  their  respective 
proprietary  goods  were  persuaded  to  adopt  it  entirely  by  the 
representation  of  the  benefit  which  would  accrue  to  the  ma- 
jority of  their  distributing  agents  or  vendees,  the  wholesale 
and  jobbing  druggists,  who  were  unable  to  handle  the  goods 
as  cheaply  as  the  few  who  could  command  large  capital."  It 
is  also  alleged  that  the  firm  of  John  D.  Park  &  Sons,  and  this 
plaintiff  since  its  organization,  before  the  happening  of  the 
matters  alleged  in  the  complaint,  had  made  large  purchases, 
as  wholesale  and  jobbing  druggists,  of  the  proprietary  goods 
of  all  or  nearly  all  of  the  various  manufacturers,  and,  had  it 
not  been  for  the  happening  of  the  matters  set  forth  in  the 
complaint,  it  would  have  continued  to  make  large  purchases, 
as  wholesale  and  jobbing  druggists,  of  such  goods,  and  would 
have  been  an  active  and  constant  competitor  of  all  the  other 
wholesale  and  jobbing  druggists  in  the  United  States.  The 
meaning  of  these  allegations  is  obvious.  It  is  that  the  plaintiff, 
or  the  firm  of  John  D.  Park  &  Sons,  of  which  the  plaintiff  is 


THE  COMMON  LAW  561 

successor,  could  command  large  capital,  and  by  reason  of  this 
they  could  purchase  proprietary  goods  in  larger  quantities 
and  more  cheaply  than  the  other  wholesale  and  jobbing  drug- 
gists, and  that  by  reason  of  the  adoption  of  the  contract  plan 
the  plaintiff  was  unable  to  so  do.  Under  the  contract  plan  the 
prices  of  these  goods  were  made  uniform  for  fixed  quantities, 
and  dealers  possessing  large  capital,  and  thereby  enabled  to 
purchase  in  large  quantities,  could  not  purchase  for  a  less  sum 
than  the  ordinary  wholesale  and  jobbing  druggist,  and,  not 
being  able  to  purchase  for  a  less  sum,  could  not  handle  the 
goods  more  cheaply.  The  situation  is  not  new.  It  is  one  to 
which  the  attention  of  the  public  has  been  frequently  drawn 
in  recent  years.  The  great  merchants,  possessed  of  large  cap- 
ital, will  persuade  and  induce  manufacturers  to  sell  to  them 
more  cheaply  in  consequence  of  their  taking  large  quantities, 
and  thus  they  are  enabled  to  undersell  and  drive  out  of  busi- 
ness the  small  merchants  in  their  vicinity.  I  am  not  here  going 
to  question  the  right  of  the  big  fish  to  eat  up  the  little  fish — 
the  big  storekeeper  to  undersell  and  drive  out  of  business  the 
little  storekeeper — but  I  do  believe  that  the  little  fellows  have 
the  right  to  protect  their  lives  and  their  business,  and  if  they 
can,  by  force  of  argument  and  persuasion,  induce  manufac- 
turers to  establish  a  uniform  price  for  fixed  quantities,  so  that 
they  can  purchase  as  cheaply  as  the  great  merchants,  and  thus 
compete  with  them  in  the  retail  trade,  they  have  the  right  to 
do  so,  and  that  no  court  of  equity  ought  to  interfere  and  re- 
strain them  from  the  exercise  of  this  privilege. 

The  authorities  have  been  largely  discussed  by  my  asso- 
ciates. I  do  not  understand  that  we  widely  differ  with  refer- 
ence to  the  law.  Our  chief  controversy  appears  to  arise  out 
of  the  different  conclusions  to  which  we  have  arrived  with 
reference  to  the  allegations  of  facts  contained  in  the  complaint. 

The  judgment  should  be  affirmed,  with  costs. 

PARKER,  C.  J.  It  does  not  seem  to  me  that  this  case  comes 
within  the  principle  of  the  Union  Bluestone  Co.  Case,  164  N. 
Y.  401,  52  L.  R.  A.  262,  79  Am.  St.  Rep.  655,  the  Berlin  &  Jones 
Envelope  Co.  Case,  166  N.  Y.  292,  and  kindred  cases ;  and  I 
am  not  without  some  acquaintance  with  those  cases,  inasmuch 
as  the  judgment  affirmed  in  the  first  case  was  directed  by  me 

Kales  R.  of  T.  Vol.  1—36 


562    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

at  circuit,  and  the  opinion  in  the  last  written  by  me.  Nor  is 
there  any  case  in  this  court,  so  far  as  we  have  found,  precisely 
analogous;  but  the  principle  underlying  the  decision  in  Na- 
tional Protective  Association  v.  Gumming,  170  N.  Y.  315,  58 
L.  R.  A.  135,  88  Am.  St.  Rep.  648,  is  applicable,  for  reasons 
which  I  shall,  as  briefly  as  possible,  suggest. 

It  will  be  observed  that  this  is  not  a  case  where  the  manu- 
facturers have  combined  for  the  purpose  of  raising  prices  to 
the  consumer  of  the  remedies  they  manufacture,  nor  does  it 
appear  that  it  is  the  object  of  the  wholesale  dealers,  who  form 
the  aggressive  part  of  this  association,  to  increase  the  price  to 
the  consumer.  If  the  object  be  to  raise  the  price  to  the  con- 
sumer, and  thus  increase  the  profits  of  the  manufacturer  and 
the  agency  by  which  he  passes  his  goods  on  to  his  retail  dealers, 
then  it  may  well  be  that  it  is  void  because  in  restraint  of  trade, 
within  the  principle  of  the  Union  Bluestone  Co.  Case  and  the 
Berlin  &  Jones  Envelope  Co.  Case,  supra,  notwithstanding  the 
impression  that  there  may  be  in  some  judicial  minds,  and  pos- 
sibly in  others,  that  proprietary  remedies  are  not  entitled  to 
be  classed  among  the  necessaries  of  life.  The  phrase  "neces- 
saries of  life,"  as  used  in  connection  with  the  subject  of  re- 
straint of  trade,  must  certainly  be  regarded  as  broad  enough 
to  include  articles  of  which  the  public  consume  $60,000,000 
worth  in  a  year. 

The  object  of  this  association,  however,  is  not  to  fix  prices 
at  which  the  manufacturer's  goods  must  be  sold.  It  attempts 
no  restraint  whatever  upon  the  manufacturer  in  making  prices. 
He  may  lower  or  increase  the  price  at  his  pleasure.  In  that 
respect  he  is  precisely  as  free  as  he  was  before  the  association 
was  formed  and  he  became  a  member  of  it.  He  may  name  the 
price  which  the  consumer  shall  pay  for  his  article  now,  as  he 
could  then,  which  means  that  he  can  both  make  the  price,  and 
enforce  it  by  contract.  Garst  v.  Harris,  177  Mass.  72;  Fowle 
v.  P^rk,  131  U.  S.  88,  33  L.  Ed.  67 ;  Walsh  v.  Dwight,  40  App. 
Div.  513,  58  N.  Y.  Supp.  91. 

That  being  so,  the  query  naturally  is,  what  restraint  does 
the  association  put  upon  the  manufacturer,  and  what  can  be 
the  purpose  of  this  association,  which  does  not  seek  an  in- 
creased profit  at  the  expense  of  the  masses? 

The  answer,  as  I  read  the  complaint,  is  that  the  distributing 


THE  COMMON  LAW  563 

agencies — the  wholesale  dealers — by  which  the  manufacturer's 
goods  are  passed  on  to  the  retailer,  where  the  public  may- 
obtain  them,  have  been  taught  by  experience  two  things: 
First.  That  manufacturers  have  favorites,  to  whom  they  will 
give  a  larger  rebate  than  to  wholesale  dealers  as  a  class;  and 
generally  the  favorite  is  the  person  or  corporation  buying  the 
greatest  amount  of  goods,  as  strong  firms  or  corporations  like 
this  plaintiff,  with  a  business  of  such  dimensions  that  it  claims 
damages  in  this  case  of  one-half  million  of  dollars.  Second. 
That  there  are  wholesale  dealers  who,  for  the  purpose  of  get- 
ting clients  away  from  their  competitors,  will  give  them  some 
part  of  such  extra  rebate.  To  remedy  this  difficulty  was  the 
leading  object  of  the  association,  and  it  was  sought  to  be  ac- 
complished by  placing  all  the  wholesalers  upon  an  equality,  so 
that  one  should  have  no  advantage  over  the  other  in  dealing 
with  retail  dealers — a  result  which  seems  altogether  desirable, 
because  it  is  in  the  line  of  fair  dealing. 

Indeed,  the  principle  which  they  undertake  to  secure  in  this 
case  by  contract  is  like  that  which  the  Sherman  act  attempted 
to  secure  in  part,  namely,  equal  freight  rates  to  all  interstate 
commerce  shippers  from  common  carriers.  Before  that  act 
was  passed,  the  claim  was  made  (and  evidence  was  adduced 
in  support  of  it)  that  rebates  of  such  magnitude  were  allowed 
in  occasional  instances  to  favorite  shippers  that  it  contributed 
largely,  if  not  entirely,  toward  driving  others  out  of  business, 
which  was  deemed  so  against  public  policy  that  Congress  set 
about  placing  all  parties  on  an  equality  as  to  the  cost  of  ship- 
ping goods  by  interstate  common  carriers.  Assuming,  as  we 
must,  that  this  legislation  was  along  proper  lines,  for  the  pur- 
pose of  protecting  the  principle  of  competition  at  a  point  where 
it  seemed  to  be  open  to  attack,  it  necessarily  follows  that  it  is 
in  accord  with  public  policy  that  these  wholesale  dealers  may 
attempt  to  secure  to  themselves  by  contract  like  fair  dealing 
on  the  part  of  the  manufacturers,  namely,  that  the  rebate  from 
the  latter 's  "long  prices,"  which  the  manufacturer  allows  as 
compensation  to  the  wholesaler  for  distributing  the  goods  to 
the  retailers,  shall  be  alike  to  all  of  them. 

Before  this  association  was  formed,  the  complaint  alleges, 
there  was  no  fixed  rebate,  so  that  the  manufacturer  could  and 
did  allow  to  some  a  greater  rebate  than  he  did  to  others:  and 


564    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

that  such  a  course  of  dealing  might  operate  to  enable  one 
wholesaler  to  profit  greatly  at  the  expense  of  the  others  goes 
without  saying.  These  agencies  for  distribution  between  the 
manufacturer  and  the  retailer,  called  the  "wholesale  dealers," 
set  about  protecting  themselves  against  what  they  deemed 
unfair  competition  which  resulted  to  them  when  a  manufac- 
turer saw  fit  to  give  some  one  dealer  a  much  larger  rebate 
than  allowed  to  them  as  a  class. 

After  forming  the  association,  they  adopted  first  what  is 
called  in  the  complaint  the  "rebate  plan."  By  that  plan  the 
proprietor  fixes  the  price  of  his  article,  known  as  the  "long 
price, ' '  and  agrees  to  pay  expressage  and  cartage  to  any  point 
from  which  it  may  be  ordered.  The  result  is  that  if  the  long 
price  is  $1,  the  article  is  sold  to  the  consumer  at  exactly  that 
price  in  all  parts  of  the  country,  which  is  very  important  to 
the  proprietors,  as  they  view  it;  and  it  must  be  borne  in  mind 
steadily  that  it  is  settled  by  authority  that  the  proprietor  of 
patent  medicines  has  the  right  to  fix  the  price  at  which  his 
article  shall  go  to  the  consumer,  and  a  druggist  who  takes  his 
articles  for  sale  under  an  agreement  that  he  will  maintain  the 
price  is  liable  to  respond  in  damages  if  he  violates  the  contract. 
Garst  Case,  and  others,  supra.  This  plan  was  found  to  be 
insufficient  to  accomplish  the  desired  result,  because  distrib- 
utors violated  their  contracts  to  sell  at  the  "long  price." 

The  Detroit  plan  was  then  devised,  and  all  the  proprietors 
were  to  sell  their  goods  only  to  wholesale  or  jobbing  druggists, 
and  not  to  the  retail  trade ;  and  the  committee  on  proprietary 
goods,  which  was  composed  of  wholesale  druggists,  members 
of  the  association,  agreed  to  furnish  proprietors  lists  of  whole- 
salers who  could  be  depended  upon  to  keep  their  contracts, 
and  cut  off  lists  of  dealers  who  did  not  keep  their  contracts,  or 
who  bought  as  a  mere  cover  for  dealers  who  were  known  not 
to  keep  their  contracts.  Under  this  plan  every  wholesaler  is 
at  liberty  to  buy  all  the  goods  he  chooses  of  the  manufacturers, 
and  can  secure  the  same  rebate  as  any  member  of  the  associa- 
tion, but  he  has  to  agree  to  the  plan,  and  he  has  to  keep  his 
agreement.  This  the  plaintiff  refuses  to  do,  and,  under  the 
agreement  which  the  manufacturers  have  with  this  associa- 
tion, they  are  not  at  liberty  to  give  plaintiff  the  benefit  of  the 
rebate  rate  which  they  give  members  of  the  association,  so 


THE  COMMON  LAW  565 

long  as  he  insists  upon  it  that  he  will  not  abide  by  the  rules  of 
the  association.  He  can  have  all  the  goods  that  he  wishes, 
provided  he  pays  "long  prices"  for  them,  but  he  cannot  buy 
goods  of  the  manufacturers  who  belong  to  this  association  at 
any  less  than  the  "long  price."  In  other  words,  he  cannot 
get  the  benefit  of  the  rebate  unless  he  will  agree  to  come  in  and 
be  bound  by  the  rules  of  the  association. 

Wholesalers  of  whom  complaint  is  made  are  not,  therefore, 
attempting  to  prevent  plaintiff  from  enjoying  all  the  oppor- 
tunities' for  profitable  trade  which  they  enjoy,  for  they  have 
invited  him  to  become  a  member — indeed,  have  urged  him  to 
do  so,  and  assured  him,  in  common  with  them,  of  every  ad- 
vantage which  they  possess ;  but  they  do  attempt  to  prevent 
him  or  any  other  dealer  from  making  uncertain  in  its  rewards, 
if  not  wholly  unprofitable,  the  business  of  distributing  pro- 
prietary articles  among  retail  dealers. 

Plaintifi^  once  attempted  to  do  business  in  accord  with  the 
association,  but  apparently  reached  the  conclusion  that  it 
would  be  more  profitable  to  him,  in  the  end,  to  deal  inde- 
pendently, and  so  he  refused  longer  to  be  bound  by  the  rules 
of  the  association;  and,  hence,  the  strife  between  the  associa- 
tion and  plaintiff,  which  has  culminated  in  this  suit — plaintifl; 
seeking  to  get  the  benefit  of  the  same  or  a  larger  rebate  than 
the  members  of  the  association,  without  being  bound  by  its 
rules,  and  the  association  doing  its  utmost  to  persuade  the 
manufacturers  not  to  give  him  the  benefit  of  the  rebate  so  long 
as  he  continues  to  oppose  the  policy  of  the  association. 

The  position  of  the  respective  contestants  is  not  far  differ- 
ent, it  will  be  seen,  from  that  of  the  parties  to  the  action  of 
Nat.  Protective  Ass  'n  v.  Gumming,  supra.  Each  is  striving,  as 
against  others,  to  help  itself  or  himself,  and  the  question  is 
here,  as  in  that  case,  whether  defendants,  in  taking  such  action 
as  they  did  to  prevent  plaintifl;  from  getting  the  business  they 
wanted,  are  violating  any  rule  of  law.  The  wholesale  deaJers 
had  the  right  to  contract  to  secure  such  amount  of  rebate  from 
the  manufacturers  as  would  reasonably  compensate  them  for 
their  services  in  distribution,  together  with  the  money  invested. 
It  is  not  claimed  that  the  rate  of  compensation  agreed  upon 
was  unfair,  and,  if  there  could  be  such  complaint,  it  is  difficult 
to  see  who  could  make  it,  except  the  manufacturers  them- 


566    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

selves,  and  they  do  not.     It  was  clearly  legal  for  any  one  of 
the  wholesale  dealers  to  sign  the  agreement,  and  to  bind  him- 
self to  sell  at  such  prices  as  the  manufacturer  of  the  article 
should  see  fit  to  name  as  the  selling  price.    The  right  to  fix  the 
price  belonging  to  the  manufacturer,  it  was  proper  for  the 
wholesaler  to  agree  to  recognize  that  right,  and  govern  himself 
accordingly.    He  had  the  right  to  insist  that,  in  consideration 
of  his  performing  those   conditions  in   accordance   with  the 
wishes  of  the  manufacturer,  the  latter  should  not  give  to  other 
dealers  the  rebate  provided  for  members  of  the  association, 
unless  such  dealer  should  agree  to  be  bound  by  the  same  con- 
ditions the  members  of  the  association  took  upon  themselves; 
and  he  had  a  right  to  agree  that,  in  order  to  secure  the  due 
carrying  out  of  the  agreement  according  to  the  spirit  thereof, 
he  would  furnish  to  the  manufacturer  such  evidence  as  he 
might  secure  from  time  to  time,  tending  to  show  that  mem- 
bers of  the  association  were  directly  or  indirectly  violating 
its  rules ;  and  that  which  he  could  do  alone,  he  and  they  could 
do  as  members  of  the  association,  provided,  of  course,  their 
coming  together  did  not  operate   against  the   rights  of  the 
general  public;  but  as  against  other  selling  agents  like  them- 
selves, no  other  public  interest  being  affected,  there  could  be 
no  doubt  of  their  right  to  agree  with  each  other  to  do  what 
any  of  them  could  do  alone,  so  long  as  the  motive  was  proper. 
The  members  of  the  association  not   only  had  the  right  to 
inform  the  manufacturers  about  those  members  within  it,  and 
the  dealers  without  it,  who  were  violating  the  plans  agreed 
upon ;  but  they  also  had  the  right  to  take  such  legitimate  and 
honorable  means  as  were  within  reach  to  ascertain  what  per- 
sons were  violating  the  rules,  and  to  give  notice  of  it  to  all  of 
the  members  of  the  association.    "But  that  course  operated," 
says  the  plaintiff,  in  effect,  "to  deprive  me  of  the  opportunity 
of  buying  goods  on  terms  as  favorable  as  the  defendant  whole- 
sale dealers  bought  them."     True,  but  it  may  be  answered 
that  "you  could  buy  them  on  the  same  terms  as  the  members 
of  the  association,  which  terms  contain  conditions  governing 
the  sale  and  the  conduct  of  the  members.    Instead,  you  prefer 
to  take  the  business  chances  to  be  found  outside  of  the  asso- 
ciation; and,  before  the  courts  will  help  you,  you  must  show 


THE  COMMON  LAW  567 

that  the  plans  of  the  association,  or  its  conduct  under  those 
plans,  are  unlawful  as  against  you." 

The  position  attempted  to  be  taken  at  this  juncture  by  the 
plaintiff  is  that,  granting  the  plans  which  the  members  of  the 
association  adopted  were  legal,  nevertheless  the  wholesale 
dealers  can  be  proceeded  against  in  this  suit,  because  they  com- 
pelled some  or  all  of  the  manufacturers,  against  their  will  and 
inclination,  to  refuse  to  sell  their  goods  to  plaintiff,  by  threats, 
intimidation,  blacklisting,  and  other  unlawful  acts  of  the  asso- 
ciation. This  language  has  a  formidable  sound,  but  subjected 
to  the  same  analysis  as  was  given  to  the  word  "threats"  in 
the  connection  in  which  it  was  used  in  the  Nat.  Protective 
Association  Case,  supra,  it  will  prove  to  be  without  force. 
There  are  no  threats  alleged  in  this  complaint  on  the  part  of 
defendants  to  do  anything  except  that  which  they  have  a 
right  to  do,  if  the  views  so  far  expressed  be  sound;  and  we 
said  in  that  case,  and  it  is  proper  to  repeat  here,  that  a  man 
may  threaten  to  do  that  which  the  law  says  he  may  do,  pro- 
vided that,  within  the  rules  laid  down  in  certain  cases  therein 
cited,  his  motive  is  to  help  himself.  If  there  be  any  other 
"intimidation"  of  manufacturers  than  that  to  be  found  in  the 
agreements  and  written  plans  of  this  association,  and  the  stead- 
fast purpose  on  the  part  of  its  members  to  carry  them  out 
according  to  their  letter,  it  is  not  to  be  found  in  the  complaint. 
The  term  "blacklisting"  refers  to  the  course  of  defendants  in 
notifying  the  trade,  in  effect,  that  the  plaintiff  is  outside  of 
the  association,  and  prefers  to  stay  out  of  it  rather  than  be 
bound  by  the  rules  and  regulations  which  other  members  of 
the  trade  regard  as  fairest  and  best  to  all,  and  insisting  that 
the  penalties  of  such  a  course  shall  be  meted  out  to  him, 
namely,  that  he  shall  not  be  allowed  any  rebate  upon  any  of 
the  manufacturers'  goods  so  long  as  he  shall  retain  that  posi- 
tion. The  facts  alleged  by  them  are  true.  The  notification  is 
a  part  of  the  plan  agreed  upon  by  all,  and  the  plaintiff  courted 
it  rather  than  do  business  on  the  same  basis  as  his  competitors, 
who  together  handled  about  90  per  cent,  of  the  proprietary 
articles  sold. 

The  plaintiff's  characterization  of  the  acts  of  the  defend- 
ants do  not  establish  a  cause  of  action  against  the  defendants 
if  the  acts  themselves  do  not,  and  clearly  their  acts  do  not, 


568    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

inaamucli  as  they  are  not  aimed  at  preventing  the  plaintiff  or 
any  one  else  from  participation  in  the  trade  to  the  same  extent 
and  on  the  same  basis  as  themselves,  but  are  intended  simply 
to  prevent  plaintiff  and  others  from  enjoying  the  same  or 
greater  rebates  than  they  get  without  bearing  the  burdens 
which  tliey  assume  as  a  condition  of  receiving  them,  unless  it 
may  be  said  that  the  fact  that  they  have  agreed  upon  a  basis 
of  transferring  the  goods  from  the  manufacturer  that  insures 
only  reasonable  profit  and  security  to  them  as  distributing 
agents  is  illegal  and  void.  And  this  would  seem  to  be  impos- 
sible, in  view  of  the  fact  that  the  wholesale  dealers  have  not 
secured  the  authority  to,  nor  attempted  to,  restrict  either  the 
price  or  the  quantity  sold  of  the  goods  dealt  in.  One  of  these 
elements  has  always  been  present  in  the  cases  of  the  past  in 
this  state,  in  which  it  has  been  held  that  there  existed  a  com- 
bination in  restraint  of  trade,  which  was  against  public  policy 
and  void. 

It  will  be  seen,  therefore,  that  this  is  a  controversy  between 
opponents  in  bus-iness,  neither  side  trying  to  help  the  public. 
Nor  will  the  public  be  the  gainer  by  the  success  of  either. 
The  motive  behind  the  action  of  each  party  is  self-help.  It  is 
the  usual  motive  that  inspires  men  to  endure  great  hardships 
and  take  enormous  risks  that  fortune  may  come.  In  the  strug- 
gle which  acquisitiveness  prompts,  but  little  consideration  is 
given  to  those  who  may  be  affected  adversely.  Am  I  within 
my  legal  rights  ?  is  as  near  to  the  equitable  view  as  competitors 
in  business  usually  come.  When  one  party  finds  himself  over- 
matched by  the  strength  of  the  position  of  the  other,  he  looks 
about  for  aid.  And  quite  often  he  turns  to  the  courts,  even 
when  he  has  no  merit  of  his  own,  and  makes  himself  for  the 
time  being  the  pretended  champion  of  the  public  welfare,  in 
the  hope  that  the  courts  may  be  deceived  into  an  adjudication 
that  will  prove  helpful  to  him.  Now,  while  the  courts  will  not 
hesitate  to  enforce  the  law  intended  for  the  protection  of  the 
public  because  the  party  invoking  such  protection  is  unworthy, 
or  seeks  the  adjudication  for  selfish  reasons  only,  they  will  be 
careful  not  to  allow  the  process  of  the  courts  to  be  made  use 
of  under  a  false  cry  that  the  interests  of  the  public  are  men- 


THE  COMMON  LAW  569 

aced,  when  its  real  purpose  is  to  strengthen  the  strategic  posi- 
tion of  one  competitor  in  business  as  against  another. 

I  concur  with  Judge  Haight. 

The  judgment  should  be  affirmed,  with  costs. 

MARTIN,  J.  (dissenting).  I  am  unable  to  concur  in  the 
opinion  of  the  learned  Appellate  Division,  or  in  the  conclusion 
reached  by  a  majority  of  this  court.  The  demurrers  to  the 
amended  complaint  were  sustained,  both  at  the  Special  Term 
and  in  the  Appellate  Division,  upon  the  ground  that  the  com- 
plaint did  not  state  facts  sufficient  to  constitute  a  cause  of 
action,  although  apparently  for  different  reasons.  Several  of 
the  defendants  stated,  as  additional  grounds  of  demurrer,  that 
the  court  had  no  jurisdiction  over  them,  and  that  it  had  no 
jurisdiction  of  the  subject  of  the  action.  The  latter  grounds 
were  not  considered  or  passed  upon  by  either  court,  and 
obviously  cannot  be  sustained. 

The  amended  complaint  was  served  in  September,  1898.  The 
defendants  demurred,  and  the  issue  arising  upon  such  de- 
murrers was  decided  by  the  Special  Term  in  May,  1900,  and 
subsequently  the  final  judgment  was  entered.  The  complaint 
is  exceedingly  lengthy,  containing  about  150  pages  and  about 
600  folios.  The  labor  necessary  to  a  careful  analysis  of  the 
multifarious  allegations  in  this  lengthy  complaint  is  well-nigh 
appalling,  and  would  naturally  provoke  a  desire  to  avoid  it  if 
possible.  But  as  the  case  is  important,  affecting  not  only  the 
parties  to  this  particular  litigation,  but  involving  a  principle 
which  affects  the  general  public,  its  dealings  in  a  large  class 
of  merchandise,  the  legality  of  monopolies  organized  to  pre- 
vent competition  in  articles  in  common  use,  and  the  right  to 
employ  as  a  means  to  secure  that  end  the  boycotting  or  in- 
timidation of  persons  engaged  in  the  same  general  business, 
our  duty  demands  the  performance  of  that  labor,  however 
burdensome.  Therefore,  although  it  is  impossible  within  the 
limits  of  this  opinion  to  state  all  the  material  allegations  of 
the  complaint,  yet  a  brief  statement  of  the  general  and  most 
material,  including  a  general  outline  or  history  of  the  transac- 
tions upon  which  it  is  based,  is  quite  essential  to  an  under- 
standing of  the  case. 

The  plaintiff  is  a  Kentucky  corporation,  and  its  principal 


570    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

place  of  business  is  in  Cincinnati.    Its  business  consists  of  the 
manufacture  of  proprietary  articles  or  patent  medicines,  the 
purchase  of  the  same  class  of  articles  from  other  manufactur- 
ers, and  in  selling  such  goods  to  retail  dealers.     Before  the 
acts  complained  of,  its  trade  was  large  and  profitable.     The 
defendant  association  was  organized  in  1876  under  the  name 
of  the  Western  Wholesale  Drug  Association.     Its  name  was 
changed  in  1882,  and  it  is  an  unincorporated  association.     It 
consists  of   active   and  associate  members.     The  former   are 
wholesale  and  jobbing  druggists,  and  druggists  who  also  own 
and  manufacture  certain  proprietary  goods,  who  alone  com- 
prise the  active  members  of  the  association.     Proprietors  of 
proprietary  articles,  who  only  manufacture  and  sell  their  own 
goods,    and    manufacturers    of    chemical    or    pharmaceutical 
preparations,  not  interested  in  proprietary  goods,  constitute 
the  associate  members,  but  have  no  control  or  voice  in  the 
business  or  affairs  of  the  association.    The  active  membership 
includes  at  least  two-thirds  of  the  wholesale  dealers  in  the 
United  States,  who  control  more  than  90  per  cent,  of  the  whole- 
sale and  jobbing  trade.     Formerly  patent  medicines  and  pro- 
prietary   articles   were    sold   by   the   manufacturers    through 
agents,   who   received  a   commission  for  their  compensation. 
The    trade,  however,  is    now    almost    exclusively    carried    on 
through  wholesale  dealers  and  jobbers.    The  rebate  or  discount 
allowed  to  the  wholesale  dealers  constitutes  their  profit.    Be- 
fore the  acts  complained  of,  the  discounts  or  commission  al- 
lowed by  manufacturers  were  not  fixed  or  uniform,  nor  was 
the  custom  as  to  delivery  and  charges  allowed,  in  all  instances, 
the  same,  and  there  was  then  an  active  competition  between 
the  various  wholesale  dealers.    With  this  situation  and  method 
of  transacting  the  business  the  manufacturers  were  content, 
but   the  wholesale   dealers   and   jobbers  were   dissatisfied.     In 
March,  1876,  the  association  adopted  a  schedule  of  prices  at 
which  proprietary  goods  should  be  sold  by  each  wholesale  and 
jobbing  druggist,  and  they  were  to  be  sold  at  the  prices  thus 
established    without    competition.      Afterwards,    and    in    1882, 
the  association  adopted  a  plan  under  which  the  manufacturers 
were  to  be  required  to  sell  their  goods.     By  it  there  was  to  be 
a   contract  between   the  manufacturer   and  buyer,   in   accord- 
ance with  which  the  latter  was  to  maintain  certain  prices,  fixed 


THE  COMMON  LAW  571 

by  the  proprietor;  the  articles  to  be  charged  and  invoiced  at 
the  full  jobbing  prices;  the  difference  between  the  proprietor's 
price  and  the  jobber's  to  be  allowed  to  the  buyer,  provided  he 
entered  into  a  contract  to  maintain  prices;  the  rebate  to  be 
not  less  than  10  per  cent;  and,  wherever  sent,  the  manufac- 
turers to  pay  freight  on  all  the  goods  sold. 

In  October,  1883,  the  association,  by  its  active  members, 
declared  its  purpose  to  pursue  a  continued  and  untiring  oppo- 
sition to  the  sale  by  its  members  of  articles  of  such  manufac- 
turers as  should  not  adopt  its  plan,  or,  having  adopted  it, 
should  withdraw  therefrom.  Thereupon  many  of  the  manu- 
facturers, at  the  solicitation  of  the  officers,  active  members, 
and  agents  of  the  association,  adopted  its  plan,  until  nearly 
all  the  manufacturers  in  the  United  States  were  induced  by 
the  association  to  do  so.  This  was  procured  entirely  by  the 
representation  of  the  association  as  to  the  benefit  which  would 
accrue  to  the  majority  of  their  distributing  agents  or  vendees, 
who  were  unable  to  handle  the  goods  as  cheaply  as  the  few 
who  could  command  large  capital;  and  the  manufacturers 
were  compelled  to  adopt  it  to  protect  themselves  against  the 
association  and  its  active  members,  who  constituted  a  great 
majority  of  their  customers.  All  the  active  members  of  the 
association  agreed  and  bound  themselves  to  buy  goods  only 
of  manufacturers  who  adopted  the  rebate  plan,  and  not  to  cut 
or  vary  prices,  save  by  the  discounts  and  terms  of  credit  men- 
tioned in  the  contract.  The  manufacturers  who  adopted  this 
plan  have  adopted  substantially  the  form  of  contract  required 
by  the  association,  except  in  states  having  anti-trust  laws, 
where  written  contracts  are  not  required,  but  the  purchaser 
is  required  to  make  a  verbal  agreement  to  the  same  effect, 
or  to  send  letters  agreeing  thereto.  The  manufacturers  who 
adopted  that  plan  were  compelled  to  do  so  to  protect  them- 
selves with  the  wholesale  dealers.  The  latter  have  bound 
themselves  to  give  to  retailers  who  are  their  customers  only 
the  terms  of  credit  and  discounts  fixed  by  the  contract,  and 
not  to  pay  freight,  or  to  deliver  the  goods.  The  active  mem- 
bers of  the  association  are  combining  and  conspiring  to  obtain 
an  exclusive  control  of  the  wholesale  and  jobbing  trade,  as 
between  the  manufacturer  and  the  retailer,  in  all  classes  of 
patent  medicines  or  proprietary  goods;  to  regulate  and  con- 


572    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

trol  the  methods  upon  which  such  trade  shall  be  carried  on; 
to  control  the  prices,  discounts,  allowances  for  freight,  and 
terms  of  credit  upon  which  such  goods  shall  be  sold  to  the 
various  retail  druggists  throughout  the  United  States;  and 
also  to  destroy  and  prevent  competition  between  the  whole- 
sale and  jobbing  druggists  in  the  sale  of  such  medicines  or 
goods,  and  to  limit  and  restrict  the  business  of  each  of  the 
wholesale  dealers,  or  such  of  them  as  are  in  one  locality,  to 
certain  exclusive  territory,  tributary  or  proximate  to  each. 

Prior  to  the  matters  set  forth,  many  of  the  wholesale  dealers 
were  purchasers  of  goods  of  the  plaintiff,  and,  but  for  the 
action  of  the  association,  would  now  be.  Before  its  action, 
the  plaintiff  was  a  large  purchaser,  as  a  wholesale  dealer,  of 
nearly  all  the  manufacturers  of  such  goods,  especially  of  those 
who  have  adopted  the  plan  of  the  association,  and  would  have 
continued,  but  for  the  matters  stated  in  the  complaint.  The 
plaintiff,  so  far  as  able,  always  has  been  an  active  competitor 
in  the  wholesale  and  jobbing  drug  trade,  and  has  refused  to 
combine  and  conspire  with  the  defendants  for  the  control  of 
the  trade  and  the  destruction  of  competition  therein,  or  to 
restrict  its  business  to  a  limited  territory.  It  has  sold  the 
goods  of  all  the  manufacturers  at  such  prices  and  upon  such 
terms  as  to  credits,  discounts,  allowances  for  boxing,  cartage, 
and  for  freight  as  it  deemed  advisable.  The  active  members 
of  the  association  now  claim  that  the  manufacturers  are 
bound  not  to  sell  to  any  wholesale  dealer  except  upon  the 
terms  and  conditions  imposed  by  the  association,  nor  unless 
he  signs  such  contract.  They  also  claim  that  any  person  who 
purchases  of  a  rebate  manufacturer,  unless  he  complies  with 
the  terms  of  the  contract,  is  not  to  be  trusted  or  allowed  to 
handle  the  goods  of  such  manufacturer. 

In  1885  a  committee  of  the  association  was  authorized  to 
and  called  upon  rebate  manufacturers  to  decline  all  the  plain- 
tiff's orders  until  it  was  reinstated  by  that  committee.  There- 
upon many  of  them,  to  protect  themselves  against  the  action 
of  the  association,  declined  to  sell  goods  to  the  plaintiff.  In 
September,  1886,  the  association  resolved  that  no  agreement, 
unaccompanied  by  the  rebate  contract,  should  be  considered 
on  the  rebate  plan,  and  that  where  a  firm  had,  by  the  commit- 
tee, been  found  guilty  of  violating  it,  the  manufacturers  should 


THE  COMMON  LAW  573 

withhold  supplies.  Thereafter  the  cominittee,  charging  the 
plaintiff  with  a  violation  of  the  plan,  sent  circulars  to  that 
effect  to  the  manufacturers,  urging  them  to  carry  out  the 
wishes  of  the  association,  and  sent  various  letters  to  the  same 
effect  to  rebate  manufacturers,  and  to  others  who  had  not 
adopted  the  plan,  and  the  association,  by  resolution,  also  de- 
clared that  any  member  who  should  sell  to  a  dealer  whose 
orders  had  been  declined  at  the  request  of  the  committee 
should  be  expelled;  and  thereupon  every  effort  was  made  to 
induce  all  the  members  of  the  association  and  all  the  manu- 
facturers to  refuse  to  sell  goods  to  the  plaintiff,  or  to  any 
person  who  would  sell  it  goods.  In  1887  it  sent  out  another 
circular  to  the  effect  that  any  member  who  supplied  goods  to 
a  dealer  whose  orders  had  been  declined  at  the  request  of  the 
committee  was  guilty  of  violating  the  spirit  of  his  contract, 
and  should  be  expelled,  and  advised  the  manufacturers  to 
scrutinize  orders  coming  from  unusual  quarters,  and  predicted 
that  the  firm  now  in  warfare  against  the  rebate  plan  could  not 
long  continue  its  methods.  After  receiving  these  various 
notices  and  resolutions,  many  of  the  defendants,  both  whole- 
sale dealers  and  manufacturers,  refused  to  sell  to  the  plaintiff, 
or  to  any  person  who  had  supplied  it  with  goods,  and  many 
of  them  demanded  from  each  customer  a  contract  by  which 
he  agreed  not  to  sell  to  the  plaintiff  until  it  should  be  rein- 
stated. 

In  1888  a  subcommittee  of  three  was  appointed  by  the 
association,  with  power  to  order  all  supplies  withheld  from 
any  firm  or  individual  whom  it  found  guilty  of  violating  its 
contracts,  until  the  committee  should  become  satisfied  that 
such  practices  would  be  discontinued,  and  to  request  manu- 
facturers to  refuse  supplies  to  any  person  thus  found  guilty. 
iThe  association  also  authorized  the  omission  from  future 
official  lists  of  rebate  articles  the  goods  of  such  proprietors  as 
should  continue  selling  to  violators  of  the  agreement,  and 
gave  a  committee  power  to  employ  persons  to  investigate 
charges  against  any  dealer.  Such  committee  ordered  all  sup- 
plies of  rebate  goods  to  be  withheld  from  the  plaintiff,  sent  a 
circular  to  each  manufacturer  calling  upon  him  to  comply 
with  such  order,  and  many  of  such  manufacturers  thereafter 
refused  to   sell  to  the  plaintiff,   being  compelled  thereto  to 


574    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

protect  themselves  against  the  wholesale  dealers'  association 
and  its  active  members.  The  committee  also  made  efforts  to 
ascertain  from  whom  the  plaintiff  purchased  supplies,  and 
employed  detectives  for  that  purpose,  who  spied  upon  the 
plaintiff's  business,  and  reported  to  the  committee  the  names 
and  places  of  business  of  persons  shipping  it  goods.  It  there- 
upon sent,  and  is  about  to  continue  sending,  circulars  to 
manufacturers  and  wholesale  dealers,  known  as  ' '  cut-off  lists, 
containing  the  names  of  persons  reported  as  selling  to  the 
plaintiff,  and  it  thereupon  made  efforts,  and  is  about  to  con- 
tinue its  efforts,  to  induce  manufacturers  not  to  sell  to  persons 
on  such  cut-off  lists,  and  by  reason  thereof  many  manufac- 
turers have  refused  to  sell  to  persons  thereon. 

In  1893  the  association  adopted  the  Detroit  plan,  by  which 
it  required  the  manufacturers  to  compel  the  purchasers  of 
their  goods  to  accept  a  contract  to  become  selling  agents,  to 
take  the  goods  in  fixed  quantities,  and  in  consideration  of 
their  maintaining  fixed  selling  prices  and  complying  with  all 
the  regulations  of  the  association  they  were  to  receive  a  fixed 
per  cent,  for  selling  and  a  fixed  discount  for  cash ;  the  manu- 
facturer to  pay  the  freight;  the  prices  not  to  be  cut,  and,  if 
cut,  the  agency  to  be  withdrawn,  and  all  other  agents  notified 
not  to  sell  them;  and  the  manufacturers  to  sell  only  through 
selling  agents.  It  then  provided  for  the  organization  of  a 
similar  association  in  each  town,  which  was  to  be  given  a  list 
of  all  rebate  goods.  Thereafter  the  manufacturers  were,  in 
effect,  required  to  submit  full  lists  of  all  their  customers  to 
the  association. 

In  December,  1893,  the  committee  sent  a  circular  to  manu- 
facturers and  wholesale  dealers,  asking  the  former  to  furnish 
it  a  list  of  all  their  customers,  and  with  this  circular  was  a 
list  of  all  persons  who  were  entitled  to  purchase  rebate  goods, 
which  did  not  include  the  plaintiff  or  persons  selling  to  it. 
Thereupon  many  rebate  proprietors,  at  the  instance  of  the 
committee,  agreed  to  confine  their  sales  to  the  persons  named 
on  the  lists,  refused  to  allow  to  others  any  rebate,  allowances, 
or  discounts,  and  furnished  the  committee  with  full  lists  of 
their  customers  not  named  on  the  list  from  whom  they  re- 
ceived orders  for  any  of  their  goods.  The  committee  is  making 
every  effort  to  ascertain  what  manufacturers  are  still  selling 


THE  COMMON  LAW  575 

to  the  plaintiff,  and  is  employing  detectives  for  that  purpose, 
who  watch  and  spy  upon  shipments  made  to  the  plain- 
tiff and  report  the  names  of  rebate  manufacturers  who 
are  selling  it  goods.  Similar  action  on  the  part  of  the  com- 
mittee was  continued  through  1894,  which  directly  pointed  to 
the  business  of  the  plaintiff,  and  the  committee  was  authorized 
to  continue  its  aggressive  work  against  those  who  should  not 
comply  with  the  rules  of  the  association,  and  funds  were 
provided  for  that  purpose. 

In  October  of  that  year  circulars  were  sent  by  the  associa- 
tion to  all  manufacturers  and  wholesale  dealers,  whether  mem- 
bers of  the  association  or  not,  embodying  the  substance  of  its 
resolutions,  which,  in  effect,  were  a  reaffirmance  of  its  inten- 
tion to  uphold  its  plan;  that  its  committee  should  notify  its 
members  of  the  action  of  manufacturers  who,  having  had 
their  attention  called  to  the  matter,  continued  shipping  their 
goods  to  the  "Cincinnati  cutter"  (meaning  the  plaintiff),  or 
to  those  who  supply  him,  and  notify  such  manufacturers  that 
their  articles  would  be  taken  from  the  rebate  list,  and  in 
publishing  the  official  list  of  rebate  articles  issued  by  it  such 
names  would  be  omitted  therefrom;  that  the  committee  on 
proprietary  goods  be  authorized  to  continue  the  aggressive 
work  against  cutters  inaugurated  during  last  year,  and,  to 
enable  them  to  do  this  most  effectually,  means  fully  adequate 
to  provide  assistance  be  placed  at  their  disposal.  With  such 
circulars,  letters  were  sent  for  those  receiving  them  to  sign,  by 
which  they  should  agree  not  to  ship  goods  to  violators  of  the 
contract  until  they  received  assurances  that  such  violations 
were  discontinued,  and,  further,  to  furnish  the  committee 
with  lists  of  their  quantity  buyers.  Nearly  all  the  whole- 
sale dealers  and  manufacturers  signed  and  returned  such  let- 
ters to  the  committee,  being  compelled  to  do  this  in  order  to 
protect  their  own  business.  Nearly  all  the  wholesale  and 
jobbing  druggists  are  making  and  will  continue  to  make 
every  effort  to  induce  manufacturers  to  confine  the  sale  of 
their  goods  to  the  persons  named  in  the  list  containing  the 
names  of  persons  claimed  to  be  entitled  to  rebate  goods,  and 
all  or  nearly  all  the  rebate  manufacturers  have  refused  to  sell 
goods  to  the  plaintiff,  some  of  them  stating  that  they  would 
like  to  fill  its  orders,  but  that  their  relations  with  the  asso- 


576    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

ciation  prevented,  and  that  it  would  not  pay  them  to  antag- 
onize the  trade  by  selling  to  the  plaintiff.  The  correspond- 
ence alleged  in  or  annexed  to  the  complaint  shows  clearly 
that  many  of  the  manufacturers  who  formerly  sold  to  the 
plaintiff  were  compelled  by  the  association  to  forego  their 
own  desires  and  disposition  in  that  respect,  and  to  refuse  the 
plaintiff's  orders  by  reason  of  the  pressure  to  which  they 
were  subjected  by  the  association  and  its  active  members. 

The  various  resolutions,  contracts,  and  agreements  adopted 
by  such  association  to  prevent  the  plaintiff  from  conducting  a 
wholesale  and  jobbing  business  in  proprietary  goods  tended 
to  injure  and  destroy  its  business,  and  the  plaintiff's  business 
is  being  injured  and  destroyed  by  the  unlawful  acts  of  the 
defendants.  Nearly  all  the  rebate  manufacturers  who  have 
been  willing  to  sell  to  the  plaintiff  or  to  persons  who  would 
supply  it  are  refusing  to  do  so,  and  will  refuse  unless  the  acts 
of  the  association  and  its  active  members  are  restrained;  and 
that  their  acts  are  such  as  to  irreparably  damage  the  plain- 
tiff's business,  and  it  cannot  obtain  adequate  relief  at  law 
without  a  multiplicity  of  suits. 

With  other  relief  demanded,  the  plaintiff  seeks  by  this 
action  to  restrain  the  association,  its  active  members,  com- 
mittees, and  agents,  from  making  and  continuing  its  and 
their  efforts  to  prevent  the  plaintiff  from  purchasing,  and  the 
manufacturers  from  selling  their  goods  to  the  plaintiff,  by 
threats,  intimidation,  or  other  improper  means,  from  con- 
tinuing a  monopoly  of  such  business,  and  from  performing 
any  act  or  acts  that  will  impaii-  or  destroy  competition  in  the 
sale  thereof. 

While  this  is  a  meager  and  brief  synopsis  of  the  complaint, 
and  falls  far  short  of  containing  all  the  material  allegations 
therein,  yet,  as  it  gives  a  general  outline  thereof,  it  is  perhaps 
ample  to  enable  us  to  consider  the  question  of  its  sufficiency. 
As  all  the  allegations  of  the  amended  complaint,  as  well  as 
all  that  can  by  reasonable  and  fair  intendment  be  implied 
therefrom,  are  admitted  by  the  defendant's  demurrer,  we  are 
presented  with  the  question  whether  they  constitute  a  cause 
of  action  entitling  the  plaintiff  to  any  relief  whatever.  Marie 
V.  Garrison,  83  N.  Y.  14;  Sanders  v.  Soutter,  126  N.  Y.  193; 
Coatsworth  v.  Lehigh  VaUey  R.  R.  Co.,  156  N.  Y.  451 ;  Stand- 


THE  COMMON  LAW  577 

ard  Fashion  Co.  v.  Siegel-Cooper  Co.,  157  N.  Y.  60,  43  L.  R.  A. 
854,  68  Am.  St.  Rep.  749 ;  Ahrens  v.  Jones,  169  N.  Y.  555,  559, 
88  Am,  St.  Rep.  620.  Under  the  recent  authorities,  pleadings 
are  not  to  be  strictly  construed  against  the  pleader,  but  aver- 
ments which  sufficiently  point  out  the  nature  of  the  plaintiff's 
claim  are  sufficient  if,  under  them,  he  would  be  entitled  to 
give  the  necessary  evidence  to  establish  a  cause  of  action. 
Rochester  Ry.  Co.  v.  Robinson,  133  N.  Y.  242,  246 ;  Coatsworth 
V.  Lehigh  Valley  R.  R.  Co.,  156  N.  Y.  451,  457. 

In  determining  that  question  we  must  assume  that  the  asso- 
ciation was  organized  and  continued  for  the  purpose  of  mo- 
nopolizing and  controlling  the  business  of  wholesale  druggists 
and  jobbers  in  the  sale  of  proprietary  articles  or  patent  medi- 
cines in  the  entire  United  States,  to  prevent  competition 
therein,  and  to  compel  the  payment  of  greater  and  uniform 
commissions  for  the  sale  thereof.  This  was  accomplished  by 
forming  a  combination  of  two-thirds  in  number  of  all  the 
wholesale  druggists  and  jobbers  in  the  United  States,  trans- 
acting more  than  90  per  cent,  of  all  that  business,  and  then 
by  requiring  them  to  refrain  from  selling  such  goods  for  a 
less  commission  or  a  lower  compensation  than  was  established 
by  the  association,  and  to  decline  to  purchase  goods  of  any 
manufacturer  who  should  refuse  to  comply  with  its  demands, 
or  who  refused  to  transact  his  own  business  in  accordance 
with  such  rules  and  regulations  as  the  association  had,  or 
from  time  to  time  might  adopt.  Thus,  as  is  usual  in  the 
creation  of  such  trusts  or  monopolies,  the  purpose  of  the 
association  was  to  be  accomplished  by  a  combination  to  ruin 
and  destroy  the  business  of  any  manufacturer  or  wholesale 
dealer  who  should  refuse  to  be  controlled  by  the  association 
in  the  transaction  of  his  own  business. 

It  is  a  plain  perversion  of  the  complaint  to  say  that  it  states 
a  claim  or  cause  of  action  involving  merely  the  right  of  a 
manufacturer  to  sell  his  goods  to  whom  he  will.  The  question 
presented  by  the  complaint  is  whether  individuals,  firms,  or 
corporations  have  a  right  to  enter  into  a  combination  or  con- 
spiracy to  prevent  manufacturers  of  patent  medicines  from 
maintaining  competition  with  others  in  the  sale  of  their  goods, 
or  from  selling  them  in  such  manner  and  upon  such  terms  as 
they  shall  desire  or  agree  upon  with  their  customers,  and,  in 

Kales  R.  of  T.  Vol.  1—37 


578    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

case  they  do,  whether  the  members  of  the  combination  have  a 
right  to  boycott  such  articles  and  the  manufacturer  as  well. 
That  such  was  the  purpose  of  the  association,  and  that  it  and 
its  active  members  have  carried  that  purpose  into  effect,  is 
plainly  alleged  and  not  denied.  It  is  also  alleged  that  any 
person  engaged  in  the  manufacture  of  such  commodities,  who 
does  not  agree  to  enter  into  the  arrangement  required  by  that 
combination,  or  does  not  fulfill  such  agreement,  is  to  be  black- 
listed by  them,  and  they  are  to  make  every  effort  in  their 
power  to  destroy  his  business. 

Moreover,  the  association  maintains  a  committee  to  spy 
out  the  business  transactions  of  manufacturers,  to  ascertain  if 
they  sell  to  the  plaintiff  or  to  persons  not  members  of  the 
association  or  to  persons  who  sell  to  others  not  such  members, 
and,  if  it  decides  such  to  be  the  case,  to  send  to  practically  all 
the  wholesale  dealers  in  the  United  States  a  notice  in  effect 
requiring  them  to  refuse  to  deal  with  such  manufacturers, 
and  the  penalty  to  such  dealers  for  refusal  is  that  all  the 
members  of  the  association  will  decline  to  purchase  any  of 
their  goods. 

It  is  to  be  observed  that  the  claim  of  the  plaintiff  is,  not 
that  the  manufacturers  have  voluntarily  committed  any 
wrongful  acts  of  which  it  complains,  as  it  is  plainly  alleged 
that  they  desire  to  sell  it  goods,  and  would  do  so  but  for  the 
wrongful  acts  of  the  association  and  its  active  members.  Its 
claim  is  that  the  National  Wholesale  Druggists'  Association 
and  such  members  have  committed  the  wrong  from  which  it 
has  suffered  by  unlawfully  combining  together  for  the  pur- 
pose, and  by  requiring  manufacturers  to  refuse  to  sell  goods 
to  the  plaintiff',  and  by  enforcing  that  requirement  by  requir- 
ing a  refusal  by  all  its  members  to  deal  in  such  manufacturers' 
goods,  to  procure  others  to  refuse  to  deal  in  them,  and  to 
publicly  advertise  such  manufacturers  as  unworthy  dealers, 
and  thus  injure  or  destroy  their  business.  It  is  alleged  and 
admitted  that  many,  if  not  most,  of  the  manufacturers,  have 
been  compelled  against  their  will  or  inclination  to  refuse  to 
sell  their  goods  to  the  plaintiff  by  threats,  intimidation,  black- 
listing, and  other  unlawful  acts  of  the  association  and  its 
active  members.  From  the  outset  the  action  of  the  association 
and  of  its  active  members  has  been  aggressive,  persistent,  and 


THE  COMMON  LAW  579 

continuous  to  ruin  or  exclude  from  business  any  manufac- 
turer or  dealer  who  should  sell  any  of  this  class  of  goods  to 
the  plaintiff  or  others  similarly  situated.  This  scheme  was 
planned,  originated,  and  forced  upon  the  manufacturers  by 
the  association  and  its  active  members.  The  manufacturers 
did  not  seek  or  inaugurate  this  plan,  and  adopted  it  only 
because  they  were  compelled  to  do  so  to  protect  their  business 
against  the  acts  and  threats  of  such  active  members,  who 
alone  desired  its  adoption  and  enforcement  to  obtain  in- 
creased compensation,  and  to  maintain  prices  without  regard 
to  the  expense  of  conducting  business.  Under  it  the  business 
of  the  manufacturers  was  to  be  and  has  been  controlled  by  a 
combination  of  their  customers.  It  is  true  that  there  was 
reserved  to  the  manufacturers  the  right  to  establish  a  single 
price  at  which  their  goods  might  be  sold,  but  it  must  be  uni- 
form and  fixed,  without  regard  to  the  expense  of  delivery  or 
the  amount  of  the  sale.  The  rights  to  establish  the  amount  of 
commissions  to  be  paid,  and  to  determine  to  whom  their  goods 
should  be  sold,  were  withdrawn,  and  no  right  was  left  them 
to  make  any  agreement  on  the  subject  of  their  own  property, 
or  to  make  any  agreement  in  regard  to  selling  it,  with  any 
person  other  than  those  that  were  selected  by  the  combina- 
tion. In  other  words,  the  manufacturers  were  compelled  by 
their  customers  to  surrender  to  the  latter  practically  all  au- 
thority as  to  the  manner  of  the  sale  of  their  own  property 
and  the  selection  of  their  customers,  and,  unless  they  did, 
their  business  was  to  be  destroyed. 

The  foregoing  facts  are,  in  substance,  alleged  and  admitted, 
and  hence  the  question  arises  whether  the  association  and  its 
officers,  agents,  employes,  and  active  members,  by  thus  inter- 
fering with  the  plaintiff's  business,  have  pursued  a  course  of 
action  that  constitutes  an  invasion  of  or  trespass  upon  its 
rights  which  renders  them  liable  therefor.  If  this  combina- 
tion was  formed  to  accomplish  an  unlawful  purpose,  or  if  its 
purpose  has  been  accomplished  by  unlawful  means,  the  plain- 
tiff, who  has  alleged  special  damage,  can  maintain  an  action 
to  recover  by  reason  thereof. 

Therefore  in  the  further  discussion  of  this  case  we  are  led 
to  consider:    First,  whether  the  purpose  for  which  the  com- 


580    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

bination  was  formed  was  lawful ;  and,  second,  whether  it  was 
to  be  accomplished  by  lawful  means. 

As  to  the  purpose,  it  is  obvious  from  the  facts  alleged  that 
the  conspiracy  or  combination  was  formed  to  restrain  trade 
or  commerce,  to  monopolize  the  sale  of  goods  in  common  use, 
and  to  prevent  competition  therein.  Such  being  its  plain  pur- 
pose, it  is  equally  clear  that  it  was  unlawful.  From  a  very 
early  day  it  has  been  the  policy  of  this  state  and  most  other 
jurisdictions  that  free  and  unrestricted  competition  in  all 
business  pursuits  must  be  maintained,  and  the  business  maxim 
that  "competition  is  the  life  of  trade"  has  been  established 
and  sustained  by  their  courts  and  legislation.  While  this 
principle  has  not  been  thus  firmly  and  universally  settled 
without  discussion  as  to  whether  it  does  not  work  a  greater 
hardship  than  advantage  by  crushing  out  weaker  competitors 
and  causing  disaster  to  others  by  reduction  of  prices,  yet, 
notwithstanding  these  arguments,  the  consideration  which 
the  question  has  received  has  led  to  the  conclusion  that  public 
policy  requires  the  continuance  and  enforcement  of  the  rule 
of  competition  as  a  principle  controlling  business  affairs  in 
the  various  commonwealths.  This  principle  of  political  econ- 
omy is  not  based  alone  upon  the  theory  that  combinations  to 
prevent  competition  will,  of  necessity,  enhance  the  price,  as 
there  are  notable  instances  where  such  combinations  have, 
even  permanently,  reduced  the  price  of  articles  thus  traded  in 
or  manufactured;  but  it  is  founded  upon  the  theory  that  such 
combinations  may,  as  they  usually  will,  enhance  the  price, 
and  also  drive  small  and  worthy  dealers  out  of  business.  In 
People  V.  Sheldon,  139  N.  Y.  251,  263,  23  L.  R.  A.  221,  36  Am. 
St.  Rep.  690,  Andrews,  C.  J.,  said:  ''The  question  is,  was 
the  agreement,  in  view  of  what  might  have  been  done  under 
it,  and  the  fact  that  it  was  an  agreement  the  effect  of  which 
was  to  prevent  competition,  .  .  .  one  upon  which  the  law 
affixes  the  brand  of  condemnation?  It  has  hitherto  been  an 
accepted  maxim  in  political  economy  that  'competition  is  the 
life  of  trade,'  The  courts  have  acted  upon  and  adopted  this 
maxim  in  passing  upon  the  validity  of  agreements,  the  design 
of  which  was  to  prevent  competition  in  trade,  and  have  held 
such  agreements  to  be  invalid,  .  .  .  The  gravamen  of  the 
offense  of  conspiracy  is  the  combination.    Agreements  to  pre- 


THE  COMMON  LAW  581 

vent  competition  in  trade  are,  in  contemplation  of  law,  in- 
jurious to  trade,  because  they  are  liable  to  be  injuriously 
used."  The  right  of  the  plaintiff  to  recover  in  this  action 
does  not  rest  upon  the  common  law  alone,  as  the  Revised 
Statutes  provided:  "If  two  or  more  persons  shall  conspire 
to  commit  any  act  injurious  ...  to  trade  or  commerce, 
.  .  ,  they  shall  be  deemed  guilty  of  a  misdemeanor"  (2 
Rev.  St.  [1st  Ed.]  pt.  4,  c.  1,  tit.  6,  §  8,  subd.  6),  and  this  was 
re-enacted  in  subdivision  6  of  section  168  of  the  Penal  Code; 
while  subdivision  5  provided:  "If  two  or  more  persons  con- 
spire ...  to  prevent  another  from  exercising  a  lawful 
trade  or  calling,  or  doing  any  other  lawful  act,  by  force, 
threats  (or)  intimidation,  .  .  .  each  of  them  is  guilty  of 
a  misdemeanor."  In  1897  the  Legislature  passed  an  act  which 
provided:  "Every  contract,  agreement,  arrangement  or 
combination  whereby  a  monopoly  in  the  manufacture,  pro- 
duction or  sale  in  this  state  of  any  article  or  commodity  of 
common  use  is  or  may  be  created,  established  or  maintained, 
or  whereby  competition  in  this  state  in  the  supply  or  price  of 
any  such  article  or  commodity  is  or  may  be  restrained  or  pre- 
vented, or  whereby  for  the  purpose  of  creating,  establishing 
or  maintaining  a  monopoly  within  this  state  of  the  manufac- 
ture, production  or  sale  of  any  such  article  or  commodity,  the 
free  pursuit  in  this  state  of  any  lawful  business,  trade  or 
occupation  is  or  may  be  restrained  or  prevented,  is  hereby 
declared  to  be  against  public  policy,  illegal  and  void."  Laws 
1897,  p.  310,  c.  383,  §  1.  That  the  acts  alleged  to  have  been 
committed  by  the  defendants  were  injurious  to  trade  and 
commerce,  created  a  combination  to  monopolize  the  sale  of 
articles  in  common  use,  restrained  competition  in  the  supply 
of  articles  or  commodities,  and  established  and  maintained  a 
monopoly  restricting  or  preventing  trade,  is  manifest,  and 
therefore  the  combination  or  conspiracy  of  the  defendants  was 
for  an  illegal  purpose,  and  the  acts  performed  by  them  under 
it  were  also  illegal.  Hooker  v.  Vandewater,  4  Denio,  349,  47 
Am.  Dec.  258;  Clancey  v.  Onondaga  Fine  Salt  Mfg.  Co.,  62 
Barb.  395;  Stanton  v.  Allen,  5  Denio,  434,  49  Am.  Dec.  282; 
Leonard  v.  Poole,  114  N.  Y.  371,  4  L.  R.  A.  728,  11  Am.  St. 
Rep.  667 ;  People  v.  Fisher,  14  Wend.  9,  14,  28  Am.  Dec.  501 ; 
People  V.  Sheldon,  139  N.  Y.  251,  261,  23  L.  R.  A.  221,  36  Am. 


582    COMBINATIONS  AND  RESTRAINT  OF  .TRADE 

St.  Rep.  690 ;  Arnot  v.  Pittston  &  Elmira  Coal  Co.,  68  N.  Y. 
558,  23  Am.  Rep.  190;  Curran  v.  Galen,  152  N.  Y.  33,  37,  37 
L.  R.  A.  802,  57  Am.  St.  Rep.  496 ;  People  v.  Milk  Exchange, 
145  N.  Y.  267,  27  L.  R.  A.  437,  45  Am.  St.  Rep.  609 ;  Pittsburg 
Carbon  Co.  v.  McMiUin,  119  N.  Y.  46,  7  L.  R.  A.  46 ;  Judd  v. 
Harrington,  139  N.  Y.  105;  Cummings  v.  Union  Blue  Stone 
Co.,  164  N.  Y.  401,  52  L.  R.  A.  262,  79  Am.  St.  Rep.  655; 
Cohen  v.  Berlin  &  Jones  Envelope  Co.,  166  N.  Y.  292 ;  Matter 
of  Davies,  168  N.  Y.  89,  101,  56  L.  R.  A.  855 ;  United  States  v. 
Freight  Ass'n,  166  U.  S.  290,  322,  41  L.  Ed.  1007;  United 
States  V.  Joint  Traffic  Ass'n,  171  U.  S.  505,  43  L.  Ed.  259; 
Addystone  Pipe  &  Steel  Co.  v.  United  States,  175  U.  S.  211,  44 
L.  Ed.  136 ;  Beach  on  Modern  Contracts,  §  1582 ;  Richardson 
V.  Buhl,  77  Mich.  632,  658,  6  L.  R.  A.  457 ;  State  v.  Nebraska 
Distilling  Co.,  29  Neb.  700,  715 ;  Craft  v.  McConoughy,  79  111. 
346,  350,  22  Am.  Rep.  171 ;  People  ex  rel.  v.  Chicago  Gas  Trust 
Co.,  130  111.  268,  298,  8  L.  R.  A.  497,  17  Am.  St.  Rep.  319; 
Hawarden  v.  Y.  &  L.  C.  Co.,  Ill  Wis.  545,  55  L.  R.  A.  828; 
U.  S.  V.  C.  &  0.  Co.  (C.  C.)  46  Fed.  432.  In  People  ex  rel 
Tyroler  v.  Warden,  etc.,  157  N.  Y.  116,  132,  43  L.  R.  A.  264, 
68  Am.  St.  Rep.  763,  PiYRKER,  C.  J.,  very  properly  said,  "In 
this  one  [jurisdiction]  it  is  well  established  that  the  public 
welfare  is  best  subserved  by  the  encouragement  of  competi- 
tion." 

It  was  held  in  the  Arnot  Case  that  a  contract  by  one  pro- 
ducer with  another  to  withhold  his  supply  from  the  market 
was  against  public  policy,  and  void;  in  the  Curran  Case,  that 
contracts  or  arrangements  with  employers  to  coerce  other 
men  to  join  an  organization  under  the  penalty  of  the  loss  of 
their  positions  were  against  public  policy,  unlawful,  and  in 
conflict  with  the  principle  of  public  policy  which  prohibits 
monopolies  and  exclusive  privileges;  and  in  the  Milk  Ex- 
change Case  that  a  corporation  to  fix  the  price  of  milk  justified 
a  finding  that  the  corporation  was  a  combination,  the  purpose 
of  which  was  inimical  to  trade,  and  therefore  unlawful.  In 
the  McMillin  Case  a  combination  was  entered  into  for  the 
management  and  control  of  the  business  of  manufacturing 
carbon,  by  which  several  corporations  combined,  the  proceeds 
to  be  divided  in  accordance  with  the  contract,  and  it  was  held 
illegal  and  void.  In  the  Judd  Case  an  agreement  was  made 
for  the  purpose  of  suppressing  competition  in  the  sale  of  sheep 


THE  COMMON  LAW  583 

and  lambs,  and  it  was  held  contrary  to  public  policy,  and 
void,  and  also  that  the  fact  that  it  was  entered  into  for  the 
purpose  of  protecting  those  interested  from  loss  by  unreason- 
able competition  made  no  difference;  that,  the  agreement  be- 
ing intended  to  control  the  markets,  it  was  invalid,  as  the 
public  might  be  prejudiced  thereby,  and  whether  they  were 
in  fact  was  immaterial.  The  Blue  Stone  Case  involved  a  con- 
tract by  which  nearly  all  that  kind  of  stone  was  to  be  sold  at 
prices  to  be  fixed  and  uniform,  and  sales  to  be  apportioned 
between  the  producers,  and  it  was  held  that  it  was  void,  in 
that  it  threatened  a  monopoly  whereby  trade  in  a  useful 
article  might  be  restrained,  and  its  price  unreasonably  en- 
hanced. In  the  Cohen  Case  there  was  an  agreement  between 
the  manufacturers  of  85  per  cent,  of  the  envelopes  manufac- 
tured in  the  country  and  an  outside  manufacturer,  which 
provided  that  the  selling  price  of  all  envelopes  manufactured 
by  them  should  be  fixed  by  a  corporate  agent,  and  it  was  held 
that  the  combination  threatened  a  monopoly,  whereby  trade 
in  a  useful  article  might  be  restrained,  and  hence  it  was  in- 
valid. In  the  Freight  Association  Case  there  was  a  contract 
between  common  carriers,  which  resulted  in  increasing  fare 
or  freight  beyond  that  which  would  exist  if  competition  was 
free,  and  it  was  held  invalid.  In  Beach  on  Modern  Contracts 
it  is  said:  "Combinations  among  persons  or  corporations  for 
the  purpose  of  raising  or  controlling  the  prices  of  merchan- 
dise, or  any  of  the  necessaries  of  life,  are  monopolies,  and 
intolerable,  and  ought  to  receive  the  condemnation  of  the 
courts.  Monopoly  in  trade  or  in  any  kind  of  business  in  this 
country  is  odious  to  our  form  of  government.  It  is  sometimes 
permitted  to  aid  the  government  in  carrying  on  a  great  public 
enterprise  or  public  work  under  governmental  control  in  the 
interest  of  the  public.  But  its  tendency  is  destructive  of  free 
institutions,  and  repugnant  to  the  instincts  of  a  free  people, 
and  contrary  to  the  whole  scope  and  spirit  of  the  federal 
Constitution."  Thus  we  see  that  agreements  and  acts  in- 
jurious to  trade  or  commerce,  combinations  to  restrain  com- 
petition in  articles  or  commodities  in  common  use,  and  monop- 
olies restraining  or  preventing  trade  have,  by  a  long  line  of 
authorities,  been  held  to  be  illegal. 

This  brings  us  to  consider  whether  the  means  the  associa- 
tion and  its  active  members   employed  to   accomplish  their 


584    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

purpose  were  lawful.  It  will  be  remembered  that  the  means 
adopted  by  them  were  that,  if  any  dealer  or  manufacturer 
sold  goods  to  the  plaintiff  or  any  other  person  not  conforming 
to  the  requirements  of  the  association,  all  its  active  members 
were  required  to  and  refused  to  sell  the  goods  of  such  manu- 
facturer, procured  others  to  refuse  to  deal  in  his  goods,  pub- 
licly advertised  him  as  an  unworthy  dealer,  and  thus  sought 
to  injure  and  ruin  his  business.  Thus  it  was  that  the  members 
of  the  association  accomplished  their  purpose  of  preventing 
other  manufacturers  from  selling  goods  to  the  plaintiff.  Such 
means  were  cleariy  unlawful.  Temperton  v.  Russell  [1893] 
1  Q.  B.  715 ;  Rourke  v.  Elk  Drug  Co.,  75  App.  Div.  145 ;  People 
V.  Fisher,  14  Wend.  9,  14;  People  v.  N.  R.  S.  R.  Co.,  54  Hun. 
354,  2  L.  R.  A.  33,  5  L.  R.  A.  386,  affirmed  121  N.  Y.  582,  9 
L.  R.  A.  33,  18  Am.  St.  Rep.  843;  Steamship  Co.  v.  McKenna 
(C.  C.)  30  Fed.  48;  Casey  v,  Cincinnati  Typographical  Union 
(C.  C.)  45  Fed.  135,  146,  12  L.  R.  A.  193 ;  Boutwell  v.  Marr, 
71  Vt.  1,  7,  43  L.  R.  A.  803,  76  Am.  St.  Rep.  746;  Doremus  v. 
Hennessy,  176  111.  608,  614,  43  L.  R.  A.  797,  802,  68  Am.  St. 
Rep.  203;  Brown  v.  Jacobs  Pharmacy  Co.  (Ga.)  41  S.  E.  553, 
57  L.  R.  A.  547. 

In  Temperton  v.  Russell  a  firm  of  builders  refused  to  obey 
certain  rules  of  the  trade  unions  with  regard  to  building  op- 
erations, and  the  unions  sought  to  compel  them  to  do  so  by 
preventing  the  supply  to  them  of  building  materials.  In  fur- 
therance of  this  purpose,  they  requested  the  plaintiff,  who 
supplied  building  materials  to  the  firm,  to  cease  supplying 
them,  which  he  refused  to  do.  Thereupon,  with  the  object  of 
injuring  the  plaintiff  in  his  business,  in  order  to  compel  him 
to  comply  with  such  request,  the  defendants  induced  persons 
who  had  entered  into  contracts  with  him  for  the  supply  of 
materials  to  break  their  contracts,  and  not  to  enter  into  fur- 
ther contracts  with  the  plaintiff,  by  threatening  that  the 
workmen  would  be  withdrawn  from  their  employ.  The  plain- 
tiff sustained  damage  by  reason  thereof,  and  the  court  held 
that  an  action  was  maintainable  by  the  plaintiff  against  the 
defendants  for  maliciously  procuring  such  breaches  of  con- 
tract, and  for  maliciously  conspiring  together  to  injure  him 
by  preventing  persons  from  entering  into  contracts  with  him. 
In  the  Fisher  Case,  Savage,  C.  J.,  in  effect  said  that  the  owner 
of  an  article  was  not  required  to  sell  it  for  any  particular 


THE  COMMON  LAW  585 

price,  or  for  less  than  a  stated  price,  but  he  had  no  right  to 
state  the  price  at  which  others  should  sell  their  goods,  and 
that  all  combinations  to  effect  such  a  purpose  were  illegal.  In 
the  McKenna  and  Casey  Cases  it  was  held  that  all  associations 
designed  to  interfere  with  the  management  and  control  of 
lawful  business,  or  in  dictating  the  particular  terms  upon 
which  its  owners  should  conduct  it,  by  means  of  threats  of 
injury  or  loss,  by  interfering  with  their  property  or  traffic,  or 
with  their  lawful  employment  of  other  persons,  are  pro  tanto 
illegal  combinations  or  associations.  The  same  principle  was 
involved  in  the  case  of  Curran  v.  Galen,  supra. 

In  the  Boutwell  case  it  was  said:  "Without  undertaking 
to  designate  with  precision  the  lawful  limit  of  organized  effort, 
it  may  safely  be  affirmed  that  when  the  will  of  the  majority 
of  an  organized  body  in  matters  involving  the  rights  of  out- 
side parties  is  enforced  upon  its  members  by  means  of  fines 
and  penalties,  the  situation  is  essentially  the  same  as  when 
unity  of  action  is  secured  among  unorganized  individuals  by 
threats  or  intimidation.  The  withdrawal  of  patronage  by 
concerted  action,  if  legal  in  itself,  becomes  illegal  when  the 
concert  of  action  is  procured  by  coercion." 

In  Doremus  v.  Hennessy  it  was  said :  "No  persons,  indi- 
vidually or  by  combinations,  have  the  right  to  directly  or  in- 
directly interfere  or  disturb  another  in  his  lawful  business  or 
occupation,  or  to  threaten  to  do  so,  for  the  sake  of  compelling 
him  to  do  some  act  which,  in  his  judgment,  his  own  interest 
does  not  require.  Losses  willfully  caused  by  another,  from 
motives  of  malice,  to  one  who  seeks  to  exercise  and  enjoy  the 
fruits  and  advantages  of  his  own  enterprise,  industry,  skill, 
and  credit,  will  sustain  an  action.  .  .  .  'Malice,'  as  here 
used,  does  not  merely  mean  an  intent  to  harm,  but  means  an 
intent  to  do  a  wrongful  harm  and  injury.  An  intent  to  do  a 
wrongful  harm  and  injury  is  unlawful,  and,  if  a  wrongful  act 
is  done  to  the  detriment  of  the  right  of  another,  it  is  malicious, 
and  an  act  maliciously  done,  with  the  intent  and  purpose  of 
injuring  another,  is  not  lawful  competition." 

In  Brown  v.  Jacobs  Pharmacy  Co.  it  was  said:  "Suppose 
that  a  number  of  merchants  should  agree  to  fix  the  price  of 
certain  goods,  and  not  to  sell  below  that  price.  If  there  were 
no  statute  on  the  subject,  and  the  case  rested  on  the  common 


586    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

law,  the  agreement  would  simply  be  nonenforeeable ;  but  if 
they  went  further,  and  agreed  that,  if  any  other  merchant 
sold  at  a  less  price  they  would  force  him  to  their  terms,  or 
drive  away  those  dealing  with  him  by  violence,  threats,  or 
boycotting,  it  would  cease  to  be  a  mere  nonenforeeable  con- 
tract, and  if,  in  its  execution,  damages  proximately  resulted 
to  such  other  merchant,  he  would  have  a  right  of  action," 

Before  concluding  this  discussion,  there  is  another  aspect 
of  the  situation  which  seems  worthy  of  consideration,  or  of 
mention,  at  least.  If  the  decision  of  the  court  below  shall  be 
affirmed,  it  obviously  results  in  an  unfair  and  unjust  dis- 
crimination by  this  court  in  favor  of  capital  or  business  and 
against  labor  by  enforcing  the  law  as  to  one  and  refusing  as 
to  the  other.  As  we  have  already  seen,  this  court,  in  Curran 
V.  Galen,  unanimously  held  that  a  combination  or  association 
of  workingmen,  whose  purpose  was  to  hamper  or  restrict  the 
freedom  of  the  citizen  in  pursuing  his  lawful  trade  or  calling, 
through  contracts  or  arrangements  with  employers  to  coerce 
workingmen  to  become  members  of  the  organization  and  to 
come  under  its  rules  and  conditions  under  penalty  of  loss  of 
their  positions  and  of  deprivation  of  employment,  was  against 
public  policy,  and  unlawful ;  while  in  this  case  it  is  held  that  a 
combination  or  association  of  wholesale  dealers  in  useful 
articles,  whose  purpose  is  to  hamper  and  destroy  the  freedom 
of  the  plaintiff  and  others  to  pursue  their  lawful  business  by 
contracts  or  arrangements  with  manufacturers  to  coerce  them 
to  become  members  of  their  organization  and  to  come  under 
its  rules  and  conditions  under  penalty  of  the  destruction  of 
their  business,  was  not  against  public  policy  nor  unlawful. 
As  these  decisions  could  not  be  harmonized,  they  would  result 
in  a  discrimination  in  favor  of  capital  or  business  which  could 
not  be  sustained  upon  any  just  or  legal  principle  known  to  or 
established  by  statute  or  common  law.  With  the  existing 
conflict  between  capital  and  labor,  such  a  distinction  would 
not  only  be  unjust,  but  extremely  unfortunate,  especially  as 
it  can  be  justified  upon  no  principle  of  ethics,  law,  or  equity. 

Thus  far  we  have  discussed  the  illegality  of  contracts  in- 
volving the  creation  of  monopolies,  agreements  that  prevent 
competition,  and  the  right  of  individuals  or  corporations  by 
threats,  intimidation,  or  interfering  with  the  business  or  traf- 


THE  COMMON  LAW  587 

fie  of  others  to  enforce  or  compel  parties  to  enter  into  con- 
tracts in  restraint  of  trade,  under  the  general  principles  of 
the  common  law  and  the  statutes,  and  upon  the  broad  ground 
that  they  apply  to  all  lawful  contracts  or  business,  subject  to 
very  slight  limitations.  We  have  regarded  the  principle  of 
the  cases  cited  and  the  provisions  of  the  statute  as  sufficiently 
broad  to  apply  to  all  transactions  relating  to  trade  and  com- 
merce, to  the  free  pursuit  of  any  lawful  business,  trade,  or 
occupation,  and  to  the  sale  of  any  article  or  commodity  in 
common  use.  The  learned  court  at  Special  Term,  however, 
seems  to  have  emphasized  and  placed  great  reliance  upon  the 
fact  that  the  articles  to  which  this  controversy  relates  were 
not  the  prime  necessaries  of  life,  or  articles  which  were  neces- 
sary to  the  existence  of  man,  and  also  upon  the  ground  that, 
as  they  were  patent  medicines,  each  owner  possessed  a  greater 
right  as  to  their  disposition  than  he  otherwise  would,  includ- 
ing their  sale  free  from  competition  among  dealers  to  whorm 
they  were  sold;  while  the  learned  Appellate  Division  seems  to 
have  based  its  decision  upon  the  ground  that  patent  medicines 
are  not  necessaries  of  life  as  to  which  public  policy  migh^ 
restrain  a  combination  to  fix  an  exorbitant  price. 

Obviously  the  provisions  of  the  statutes  and  the  principles 
of  the  decisions  to  which  we  have  referred  are  not  limited  in 
their  application  to  the  necessaries  of  life,  but,  as  we  have 
already  seen,  they  have  a  much  broader  application,  and  in- 
clude all  articles  and  commodities  in  common  use,  or  that  are 
the  subject  of  lawful  trade  or  commerce.  In  determining 
whether  there  has  been  a  conspiracy  in  restraint  of  trade,  the 
character  of  the  trade  sought  to  be  monopolized  is  immaterial, 
so  long  as  it  is  a  lawful  one.  People  v.  Duke,  19  Misc.  Rep. 
292,  296.  Nor  is  the  operation  of  the  rule  forbidding  contracts 
restraining  competition  limited  to  trade  in  necessaries  of  life, 
but  it  extends  equally  and  alike  to  all  commodities  of  com- 
merce. Wire  Cloth  Case  (Sup.)  19  N.  Y.  Supp.  413,  note.  It 
is  apparent  from  the  character  of  this  litigation  that  the 
articles  and  commodities  to  which  it  relates  are  both  articles 
of  trade  and  commerce,  and  such  as  are  in  common  use.  This 
is  obvious  when  we  consider  the  fact  that  they  amount  an- 
nually to  about  $60,000,000,  and  constitute  more  than  two- 
thirds  of  all  the  drugs  and  medicines  sold  in  the  United  States. 


588    COIMBINATIONS  AND  RESTRAINT  OF  TRADE 

Therefore  the  fact  that  they  may  not  be  necessaries  of  life  in 
the  strictest  sense  is  not  controlling,  and  the  decision  of  the 
courts  below  cannot  be  sustained  upon  that  ground. 

Moreover,  the  fact  that  the  medicines  may  have  been  pat- 
ented or  copyrighted,  so  as  to  give  the  owners  the  exclusive 
right  of  sale,  can  make  no  difference.     It  must  be  constantly 
borne  in  mind  that  the  purpose  of  this  action  is  not  to  compel 
the  manufacturers,  against  their  will  or  disposition,   to  sell 
their  goods  to  the  plaintiff,  but  its  purpose  is  to  enjoin  the 
association,  its  active  members,  committees,  and  agents,  from 
compelling  manufacturers   or   dealers,   against   their  will,   to 
refuse  to  sell  their  property  to  the  plaintiff,  by  a  system  of 
intimidation  and  boycotting.    It  is  not  and  cannot  be  properly 
claimed  that  the  plaintiff  can  compel  the  manufacturers  to  sell 
it  their  merchandise  without  their  consent  or  against  their 
wiU,  and  the  fact  that  it  consists  of  proprietary  articles  or 
patent  medicines  can  make  no  dift'erence  whatever.    With  few 
exceptions,  which  have  no  application  here,  courts  can  compel 
no  owner  of  property  to  sell  or  part  with  his  title  to  it  without 
his  consent,  or  to  sell  or  deliver  it  to  any  particular  person. 
So  that  the  rule  is  the  same  where  a  party  is  the  exclusive 
owner  of  the  property,  whether  it  is  patented  or  not,  at  least 
so  far  as  the  question  here  involved  is  concerned.     Besides, 
there  are  authorities  which  hold  that  patentees  or  owners  of 
patents  cannot  legally  enter  into  a  combination  in  restraint 
of  trade,  or  for  the  creation  of  monopolies  in  the  sale  of  their 
goods,    and   that   such   contracts  are   unlawful.     It    is   said: 
"Patents  confer  a  monopoly  as  respects  the  property  covered 
by  them,  but  they  confer  no  right  upon  the  owners  of  several 
distinct  patents  to   combine   for  the  purpose   of  restraining 
competition  and  trade.     Patented  property  does  not  differ  in 
this  respect  from  any  other. ' '    National  Harrow  Co.  v.  Hench, 
27  C.  C.  A.  349,  39  L.  R.  A.  299;  Parke  &  Co.  v.  Druggists' 
Ass'n,  84  N.  Y.  St.  Rep.  1064;  Vulcan  Powder  Co.  v.  Powder 
Co.,  96  Cal.  510,  515,  31  Am.  St.  Rep.  242;  National  Harrow 
Co.  V.  Bement  &  Sons,  21  App.  Div.  290,  47  N.  Y.  Supp.  462 ; 
Beach  on  Monopolies  &  Industrial  Trusts,  §  175 ;  Tiedeman  on 
State  &  Federal  Control  of  Persons  &  Property,  vol.  1,  p.  412. 
If,  however,  it  was  conceded  that  the  possession  of  their 
patents  authorized  the  manufacturers  to  enter  into  combina- 


THE  COMMON  LAW  589 

tions  which  otherwise  would  be  illegal,  still  that  principle 
would  have  no  application  whatever  to  this  case.  Here  it  is 
not  the  manufacturers  or  the  patentees  who  have  organized 
the  combination  complained  of,  or  who  have  sought  to  create 
a  monopoly  and  prevent  competition.  The  patentees  have  not 
forced  or  attempted  to  force  the  wholesale  druggists  to  tran- 
sact their  business  in  any  particular  manner.  But  it  is  the 
wholesale  druggists'  association,  organized  and  controlled  by 
the  druggists,  who  have  no  special  property  or  interest  under 
the  manufacturers'  patents,  who  seek  to  and  have  enthralled 
the  patentees  themselves  and  such  of  their  customers  as  will 
not  bow  in  subjection  to  a  method  of  transacting  their  own 
business,  inaugurated  and  enforced  by  the  association.  In 
other  words,  the  plaintiff  desires  relief,  not  from  the  volun- 
tary act  of  the  patentees,  or  from  any  combination  into  which 
they  have  voluntarily  entered  or  which  they  control,  but  asks 
to  be  relieved  from  a  combination  of  their  customers  who 
have  by  threats  and  intimidation  compelled  them,  notwith- 
standing their  desire  to  do  so,  to  refrain  from  selling  their 
property  to  the  plaintiff  or  other  customers  without  the  con- 
sent of  the  association. 

Hence,  by  the  allegations  of  the  complaint,  it  is  made  ap- 
parent not  only  that  the  defendants  entered  into  and  formed 
an  illegal  combination  or  conspiracy  to  interfere  with  the 
plaintiff's  trade  by  preventing  the  various  manufacturers  of 
these  goods  from  selling  them  to  it,  and  thereby  seriously 
interfered  with  and  injured  its  busmess,  but  it  is  equally  clear 
that  the  means  employed  by  them  to  accomplish  that  purpose, 
by  threats,  intimidation,  boycotting,  and  continued  and  per- 
sistent efforts  to  injure  any  manufacturer  who  should  con- 
tinue to  deal  with  it,  were  also  illegal.  Therefore  the  de- 
fendants were  not  only  guilty  of  an  illegal  act  in  combining 
to  injure  the  plaintiff's  business,  but  were  likewise  guilty  of 
an  illegal  combination  to  accomplish  the  plaintiff's  ruin  by 
illegal  and  improper  means.  The  purpose  being  illegal,  and 
the  means  by  which  it  was  accomplished  being  also  illegal,  it 
follows  that  the  action  of  the  defendants  was  illegal,  and,  as 
against  the  plaintiff,  should  be  restrained.  These  considera- 
tions lead  to  the  conclusion  that  the  facts  alleged  in  the 
amended  complaint  and  admitted  by  the  demurrer  were  suf- 


590    COI\IBINATIONS  AND  RESTRAINT  OF  TRADE 

ficient  to  constitute  a  cause  of  action,  and  that  the  courts 
below  erred  in  holding  to  the  contrary  and  in  dismissing  the 
complaint. 

It  follows  that  the  final  and  interlocutory  judgments  herein, 
and  the  order  dissolving  the  preliminary  injunction,  should 
be  reversed,  and  the  demurrer  to  the  complaint  overruled, 
with  costs  in  all  the  courts,  but  with  leave  to  the  defendants, 
upon  the  payment  of  one  bill  of  costs,  within  20  days,  to  file 
and  serve  an  answer  to  the  amended  complaint  herein. 

CULLEN,  J.  (dissenting).  I  concur  in  the  opinion  of 
Martin,  J.,  for  reversal,  but  I  wish  to  add  a  word  as  to  my 
position  on  a  question  discussed  in  the  opinion  of  Judge 
Haight.  I  agree  with  him  that  the  combination  between  the 
jobbers  to  force  the  manufacturers  to  sell  to  each  of  their 
number  at  exactly  the  same  price  and  upon  the  same  terms, 
and  to  sell  to  no  one  else  on  any  better  terms,  was  entirely 
legal,  and  that  it  was  within  their  rights  to  accomplish  this 
result  by  refusing  to  deal  with  or  handle  the  goods  of  any 
manufacturer  who  would  not  comply  with  their  demand.  If 
the  object  of  the  combination  ceased  here,  it  would  not  be 
subject  to  criticism.  But  the  scheme  adopted  goes  further. 
It  requires  not  only  the  manufacturer  to  sell  at  the  same 
price  to  each  jobber,  but  to  compel  each  jobber  to  sell  to  the 
consumer  at  the  same  price,  by  refusing  to  sell  goods  to  any 
one  who  would  not  comply  with  these  recjuirements.  It  is  in 
this  respect  that  the  agreement  is  vicious  and  operates  in 
restraint  of  trade,  for  it  destroys  competition  among  the 
jobbers. 

O'Brien  and  Bartlett,  JJ.,  concur  with  Haight,  J.,  and 
Parker,  C.  J.  Yann,  J.,  concurs  with  Martin  and  Cullen,  JJ. 

Judgment  affirmed. 


KLINGEL'S  PHARMACY  v.   SHARP   &   DOHME 

(Court  of  Appeals  of  Maryland,  1906.    104  Md.  218.) 

McSHERRY,  C.  J.    The  question  now  before  us  is  merely 
one  of  pleading  and  involves  only  the  sufficiency  of  the  aver- 


THE  COMMON  LAW  591 

ments  of  the  declaration.  To  the  declaration  the  defendants 
demurred,  and  the  superior  court  of  Baltimore  City  sustained 
the  demurrer  and  entered  judgment  for  the  defendants  for 
costs,  and  from  that  judgment  this  appeal  was  taken. 

In  order  to  determine  whether  the  ruling  of  the  superior 
court  was  correct,  it  will  be  necessary  to  set  forth  with  some 
fullness  the  allegations  of  the  declaration,  and  the  objections 
which  have  been  urged  against  its  legal  sufficiency  will  then 
be  stated  and  considered. 

The  declaration  avers  that  Klingel's  Pharmacy  of  Balti- 
more City,  the  plaintiff,  is  a  duly-licensed,  incorporated  retail 
vendor  of  drugs  and  druggists'  supplies;  that  it  was  and  still 
is  able,  ready,  and  willing  to  pay  cash  for  all  kinds  of  drugs 
and  druggists'  supplies  needed  by  it  and  suitable  for  the 
proper  conducting  of  its  said  business;  that  the  defendants 
the  Calvert  Drug  Company  and  Sharp  &  Dohme  are  corpora- 
tions which  have  been  for  some  time  and  still  are  engaged  in 
the  business  of  selling  drugs  and  druggists'  supplies;  that  the 
other  defendant,  the  Baltimore  Retail  Drug  Association,  is  a 
corporation  formed  and  organized  for  the  purpose,  amongst 
other  things,  of  unlawfully  maintaining  amongst  dealers  in 
drugs  and  druggists'  supplies  the  maximum  rate  schedule  of 
prices  and  of  preventing,  in  restraint  of  trade,  all  vendors  of 
drugs  and  druggists'  supplies,  who  are  unwilling  to  acquiesce 
in  and  submit  to  the  prices  so  fixed  by  it,  from  buying  at  any 
price  the  drugs  and  druggists'  supplies  needed  and  desired  by 
them  in  their  business,  by  the  unlawful  coercion  of  threats 
that  any  and  all  vendors  of  drugs  and  druggists'  supplies  who 
shall  sell  for  less  than  the  schedule  prices  shall  be  themselves 
blacklisted,  and  all  sales  of  drugs  and  druggists'  supplies  be 
refused  them;  that  all  the  members  of  said  retail  drug  asso- 
ciation are  bound  by  an  agreement  not  to  sell  such  supplies 
to  any  person  or  corporation  who  will  not  agree  to  maintain 
its  maximum  schedule  of  prices ;  that  the  plaintiff  has  steadily 
refused  to  become  a  member  of  said  Baltimore  Retail  Drug 
Association,  or  to  unite  with  it  and  with  its  members  and  with 
the  other  named  defendants  in  said  combination  and  con- 
spiracy to  coerce  the  dealers  in  drugs  and  druggists'  supplies 
to  maintain  said  established  prices  by  refusing  to  sell  to  them 
and  by  threats  that,  unless  they  shall  so  maintain  the  same, 


592    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

they  shall  be  boycotted  and  placed  on  the  blacklist  and  be 
disabled  from  buying  any  drugs  and  druggists'  supplies  what- 
ever; that  though  the  plaintiff  has  repeatedly  applied  to  the 
Calvert  Drug  Company  and  to  Sharp  &  Dohme  and  to  sundry 
other  druggists  to  sell  to  it  drugs  and  druggists'  supplies, 
tendering  itself  ready,  able,  and  willing  to  pay  cash,  yet  the 
said  defendants  and  said  other  druggists  have  refused  to  sell 
it  drugs  or  druggists'  supplies  at  any  price  whatsoever,  be- 
cause of  said  unlawful  conspiracy  and  combination,  coupled 
with  the  threat  that  for  any  violation  of  such  unlawful  com- 
bination and  conspiracy  the  parties  violating  it  should  them- 
selves be  blacklisted  and  all  sales  be  refused  to  them;  that 
the  avowed  object  of  the  conspiracy  was  and  is  to  maintain 
in  restraint  of  trade  a  maximum  price  of  drugs  and  druggiste' 
supplies,  and  to  compel  the  plaintiff  to  become  a  member  of 
said  combination  and  to  agree  to  charge  all  its  customers  such 
maximum  price  or  to  be  driven  out  of  business ;  that  the  retail 
drug  association  is  wholly  composed  in  its  membership  of  such 
vendors,  and  that  the  entire  power  of  the  association  and  of 
its  members  is  unlawfully  exerted  to  coerce,  by  blacklisting 
and  by  potent  and  effective  threats  of  boycotting,  the  illegal 
purposes  and  acts  aforesaid;  that  the  wrongful  refusal  of  the 
Calvert  Drug  Company  and  of  Sharp  &  Dohme  and  of  other 
parties  to  sell  to  the  plaintiff  was  and  is  the  direct  result  ex- 
clusively of  said  unlawful  combination  and  conspiracy  and  of 
the  wrongful  actings  and  doings  of  said  retail  drug  associa- 
tion in  carrying  out  the  unlawful  object  and  purpose  of  said 
conspiracy ;  that  the  action  of  the  defendants  is  not  an  action 
taken  by  them  in  the  bona  fide  exercise  of  their  supposed 
right  to  sell  or  to  refuse  to  sell  to  whomsoever  they  please, 
nor  in  the  bona  fide  exercise  of  their  supposed  right  to  advise 
other  vendors  as  to  selling  or  not  selling  their  drugs  and 
druggists'  supplies,  but,  on  the  contrary,  that  by  the  said 
combination  and  conspiracy  the  defendants  did  wrongfully 
and  maliciously  intend  to  injure  and  destroy  the  plaintiff's 
business,  which  they  have  succeeded  in  doing;  and  that  such 
injury  to  the  business  of  the  plaintiff  is  the  direct  result  of 
said  illegal,  malicious,  and  wrongful  conspiracy  and  of  the 
acts  done  in  furtherance  thereof. 

Here,  then,  it  is  distinctly  charged  that  there  is  an  unlawful 


THE  COMMON  LAW  593 

conspiracy  to  exact  and  to  maintain  a  maximum  schedule  of 
prices  for  drugs  and  druggists'  supplies  in  restraint  of  trade; 
and  it  is  with  equal  directness  alleged  that,  because  the  plain- 
tiff will  not  enter  into  that  combination  and  conspiracy,  no 
drugs  or  supplies  have  been  or  will  be  sold  to  it  by  the  de- 
fendants, and  that  no  other  dealer  in  those  articles  is  or  will 
be  allowed  to  sell  to  it  without  mcurring  the  penalty  of  being 
blacklisted  and  boycotted  as  threatened  by  the  defendants, 
which  action  of  the  defendants  was  not  taken  in  the  bona  fide 
exercise  of  their  right  to  sell  or  to  refuse  to  sell  to  whom  they 
pleased,  but  was  taken  with  a  malicious  intent  to  injure  and 
destroy  the  business  of  the  plaintiff,  whereby  the  plaintiff 
has  been  wholly  deprived  of  the  ability  to  purchase  supplies 
and  has  as  a  result  been  prevented  from  pursuing  its  lawful 
avocation.  By  sustaining  the  demurrer,  the  superior  court 
held  that  these  facts,  if  true,  did  not  constitute  a  valid  cause 
of  action.  We  are  not  apprised  by  the  record  as  to  the  ground 
upon  which  the  trial  judge  based  his  decision.  But  the  reasons 
assigned  in  the  brief  of  the  appellees  to  sustain  that  ruling 
are,  first,  because  (a)  an  agreement  or  conspiracy  not  to  sell 
to  the  plaintiff  is  not  actionable,  and  because  (b)  no  facts  are 
alleged  that  amount  to  unlawful  coercion  by  the  defendants 
to  the  damage  of  the  plaintiff;  secondly,  because  the  declara- 
tion is  bad  for  misjoinder.  These  grounds  are  not  tenable,  as 
we  shall  see  in  a  moment.  They  have  been  assumed  obviously 
in  consequence  of  a  misinterpretation  of  the  averments  of 
the  narr. 

In  the  last  analysis  it  will  be  seen  that  there  are  three 
salient  facts  averred  in  the  declaration.  First.  A  combination 
to  exact  and  maintain  a  maximum  schedule  of  prices  for  drugs 
and  druggists'  supplies  is  asserted  to  exist  between  the  de- 
fendants and  others  in  restraint  of  trade.  That  combination, 
if  it  does  exist,  and  we  are  bound  to  assume  that  it  does  when 
dealing  with  the  issue  raised  by  the  demurrer,  is  a  criminal 
conspiracy  at  the  common  law  and  is  punishable  by  fine  and 
imprisonment  after  indictment  and  conviction.  It  is  the 
offense  of  forestalling  the  market,  and  is  defined  to  be  every 
practice  or  device  by  act,  conspiracy,  words,  or  news  to  en- 
hance the  price  of  victuals  or  other  merchandise.  Roscoe,  Ev. 
437 ;  3  Inst.  196 ;  3  Bac.  Ab.  261 ;  1  Russ.  169.    As  it  creates  a 

Kalfis  E.  of  T.  Vol.  1—38 


594    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

monopoly  it  was  held  to  be  unlawful  at  the  common  law  as 
being  in  restraint  of  trade  and  against  public  policy.  Mitchel 
V.  Reynolds,  1  P.  Wms,  181.  The  English  statutes  on  this 
subject  which  were  merely  declaratory  of  the  common  law 
were  repealed  by  7  &  8  Vict.  c.  24.  In  the  United  States, 
whilst  we  hear  little  now  about  forestalling,  engrossing,  or 
regrating,  we  hear  much  of  "corners"  and  "trusts"  which 
are,  in  many  instances,  the  old  offenses  under  new  names, 
since  they  are  frequently  attempts  by  a  combination  or  con- 
spiracy of  persons  to  monopolize  an  article  of  trade  or  com- 
merce and  so  to  enhance  its  price.  Where  the  direct  and 
immediate  effects  of  a  contract  or  combination  among  par- 
ticular dealers  in  a  commodity  is  to  destroy  competition  be- 
tween them  and  others,  so  that  the  parties  to  the  contract  or 
combination  may  obtain  increased  prices  for  themselves,  such 
contract  or  combination  amounts  to  a  restraint  of  trade  in  the 
commodity,  even  though  contracts  to  buy  such  commodity  at. 
the  enhanced  price  are  constantly  being  made.  Total  sup- 
pression of  the  trade  in  the  commodity  is  not  necessary  in 
order  to  render  the  combination  one  in  restraint  of  trade. 
Addystone  Pipe  &  Steel  Co.  v.  U.  S.,  175  U.  S.  244,  44  L.  Ed. 
136.  Though  this  was  said  by  the  Supreme  Court  in  a  case 
which  arose  under  the  anti-trust  act  of  Congress  of  July  2, 
1890,  it  equally  applies  to  combinations  and  conspiracies  of 
the  character  described  in  the  declaration  set  forth  in  the 
record  now  before  us.  A  combination  is  a  conspiracy  in  law 
whenever  the  act  to  be  done  has  a  necessary  tendency  to 
prejudice  the  public,  or  oppress  individuals,  by  unjustly  sub- 
jecting them  to  the  power  of  the  confederates,  and  giving 
effect  to  the  purposes  of  the  latter,  whether  of  extortion  or 
mischief;  and  the  same  proposition  in  one  form  of  expression 
or  another  is  laid  down  in  aU  the  criminal  law.  Bish.  Cr.  L. 
§  172 ;  Desty,  Cr.  L.  §  2 ;  3  Chitty,  Cr.  L.  §  1138 ;  Arch.  Cr.  Pr. 
1830.  A  "corner,"  when  accomplished  by  confederation  to 
raise  or  depress  prices  and  operate  on  the  market,  is  a  con- 
spiracy, if  the  means  be  unlawful  Morris  Run  Coal  Co.  v. 
Barclay  Coal  Co.,  68  Pa.  173,  8  Am.  Rep.  159;  People  v. 
Melvin,  2  Wheeler,  Cr.  Cas.  (N.  Y.)  262;  People  v.  North  River 
Sugar  Refining  Co.  (Sup.)  3  N.  Y.  Supp.  407,  2  L.  R.  A.  33 
and  notes.    In  Van  Horn  v.  Van  Horn,  52  N.  J.  Law,  284,  10 


THE  COMMON  LAW  595 

L.  R.  A.  184,  it  was  ruled  that  an  action  will  lie  for  a  com- 
bination or  conspiracy  by  fraudulent  and  malicious  acts  to 
drive  a  trader  out  of  business,  resulting  in  damage.  S.  C,  10 
L.  R.  A.  184. 

The  cases  of  Kimball  v.  Harman  &  Burch,  34  Md.  407,  6 
Am.  Rep,  340,  and  Robertson  v.  Parks  et  al.,  76  Md.  118,  decide 
nothing  at  variance  with  the  principles  just  stated.  They  hold 
that  an  act  which  does  not  constitute  a  cause  of  action  when 
done  by  one  person  does  not  become  actionable  merely  be- 
cause it  has  been  done  by  conspirators;  that  an  unlawful 
combination  to  do  an  act,  which,  if  done,  would  injure  an- 
other, does  not  of  itself  and  without  more  furnish  a  ground 
for  a  civil  suit ;  and  finally,  as  a  corollary  to  the  previous 
proposition,  that  though  a  conspiracy  to  do  an  injury  exists, 
a  plaintiff  cannot  recover  against  the  conspirators  unless  some 
act  has  been  done  in  furtherance  of  the  conspiracy  which  has 
resulted  in  damage  to  him,  "The  quality  of  the  act,  and  the 
nature  of  the  injury  inflicted  by  it,  must  determine  the  ques- 
tion whether  the  action  will  lie."  Kimball  v.  Harman,  supra. 
Having  described  a  combination  which  at  the  common  law  is 
a  criminal  conspiracy,  the  declaration  proceeds  to  set  forth 
the  acts  done  in  execution  of  the  unlawful  conspiracy,  and  to 
aver  that  they  were  maliciously  done,  and  then  to  allege  the 
injury  resulting  therefrom. 

The  second  salient  fact  averred  in  the  narr.  consists  of  a 
statement  of  the  acts  done  in  furtherance  of  the  conspiracy. 
Those  acts  are  twofold:  First,  a  refusal  by  the  defendants  to 
sell  to  the  plaintiff,  an  act  they  would  have  the  legal  right  to 
do,  if  when  done  it  were  not  done  in  the  execution  of  and  to 
carry  into  effect  a  criminal  conspiracy  in  restraint  of  trade ; 
and,  secondly,  coercion  and  intimidation  practiced  by  the 
defendants  upon  other  vendors  of  like  commodities,  by  means 
of  threats  to  blacklist  and  to  boycott  such  vendors,  if  they 
sold  to  the  plaintiff  any  drugs  or  druggists'  supplies,  whereby 
they  were  deterred  from  selling  those  articles  to  the  plaintiff, 
unless  it  joined  the  association. 

"It  is  a  part  of  every  man's  legal  rights,"  said  Judge 
Cooley,  "that  he  be  left  at  liberty  to  refuse  business  relations 
with  any  person  whomsoever,  whether  the  refusal  rests  upon 
reason,  or  is  the  result  of  whim,  caprice,  prejudice,  or  malice." 


596    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Cooley,  Torts,  278.  Again:  "The  exercise  by  one  man  of 
his  legal  right  cannot  be  a  legal  wrong  to  another.  .  .  . 
Whatever  one  has  a  legal  right  to  do  another  can  have  no  right 
to  complain  of."  Id.  688.  It  was  upon  this  principle  that 
the  decision  in  Bohn  Manf,  Co.  v.  N.  W.  Lumbermen  Ass'n, 
54  Minn.  223,  21  L.  R.  A.  337,  40  Am.  St.  Rep.  319,  was 
placed.  In  that  case  a  large  number  of  retail  lumber  dealers 
formed  a  voluntary  association  by  which  they  mutually  agreed 
that  they  would  not  deal  with  any  manufacturer  or  wholesale 
dealer  who  should  sell  lumber  directly  to  consumers,  not  deal- 
ers, at  any  point  where  a  member  of  the  association  was 
carrying  on  a  retail  yard,  and  they  provided  in  their  by-laws 
that,  whenever  any  wholesale  dealer  or  manufacturer  made 
any  such  sale,  the  secretary  of  the  association  should  notify 
all  the  members  of  the  fact.  The  plaintiff  having  made  such 
a  sale,  the  secretary  threatened  to  send  notice  of  the  fact  to 
all  the  members  of  the  association,  and  it  was  held  that  no 
action  would  lie,  and  that  there  was  no  ground  for  an  injunc- 
tion. There  was  nothing  unlawful  in  this.  Each  member  of 
the  association  had  the  legal  right  to  refuse  to  sell  the  lumber 
which  he  owned,  if  he  saw  fit  to  refuse,  and  the  collective 
refusal  of  all  the  members  was  equally  lawful.  So,  too,  the 
defendants  in  this  case  had  a  perfect  legal  right  to  refuse  to 
sell  to  the  plaintiff  any  drugs  and  druggists'  supplies  owned 
by  them,  and  it  would  have  been  wholly  immaterial  whether 
that  refusal  was  the  result  of  whim,  caprice,  prejudice,  or 
malice,  if  the  bare  refusal  to  sell  had  been  the  head  and  front 
of  their  offending.  But  the  refusal  to  sell  was  not  the  exer- 
cise of  a  legal  right,  if  that  refusal  were  a  mere  step  in  the 
development  and  enforcement  of  a  scheme  to  forestall  the 
market  in  restraint  of  trade,  or  to  drive  the  plaintiff  into 
becoming  a  member  of  an  organization  which  would  control 
the  prices  he  could  charge  for  his  wares  and  which  would 
thereby  deprive  him  of  the  liberty  to  contract  for  the  sale  of 
his  goods  according  to  his  own  judgment  of  their  value. 
Whilst  an  act  which  is  in  itself  lawful  can  never  become  un- 
lawful simply  because  it  may  be  done  by  several  persons 
instead  of  by  only  one,  yet  the  same  act  may  be  unlawful 
when  it  is  a  means  of  accomplishing  an  unlawful  end.  An 
act  performed  in  furthering  an  unlawful  enterprise  cannot  be 


THE  COMMON  LAW  597 

a  lawful  act,  though  the  same  act  would  be  free  from  censure 
if  done  with  some  other  view.  If  it  be  conceded  that  a  person 
has  the  lawful  right  to  do  a  thing  irrespective  of  his  motive 
for  doing  it,  the  proposition  that  an  act  lawful  in  itself  is  not 
converted  by  a  bad  motive  into  an  unlawful  act  is  a  mere 
abstract  truism.  But  if  the  meaning  of  the  proposition  is  that 
when  a  person  or  an  aggregation  of  persons,  if  influenced  by 
one  kind  of  motive,  has  a  lawful  right  to  do  a  thing,  the  act 
is  still  lawful  when  done  with  any  motive,  or  that  an  act 
lawful  under  one  set  of  circumstances  is  therefore  lawful 
under  every  conceivable  set  of  circumstances,  then  the  propo- 
sition is  neither  logically  nor  legally  accurate.  In  so  far  as 
a  right  is  absolutely  and  unqualifiedly  lawful,  it  is  lawful 
whatever  may  be  the  motive  of  the  actor;  but  in  many  cases 
the  lawfulness  of  an  act  which  causes  damage  to  another  may 
depend  upon  whether  the  act  is  for  justifiable  cause,  and  this 
justification  may  be  found  sometimes  in  the  circumstances 
under  which  it  is  done,  irrespective  of  motive,  sometimes  in 
the  motive  alone,  and  sometimes  in  the  circumstances  and  the 
motive  combined.  Plant  v.  Woods,  176  Mass.  492,  51  L.  R.  A. 
339,  79  Am.  St.  Rep.  302.  The  intent  or  knowledge  with  which 
an  act  is  done  may  make  a  lawful  act  unlawful.  It  is  no 
offense  to  receive  stolen  goods ;  it  is  an  offense  to  receive  them 
knowing  them  to  be  stolen.  The  act  of  receiving  the  goods 
is  identically  the  same  in  each  instance.  In  the  one  case  it 
is  lawful,  in  the  other  the  same  act  is  unlawful  because  the 
scienter  makes  it  so.  To  utter  forged  paper  is  no  offense, 
but  to  utter  it  knowing  it  to  be  forged  is  criminal.  It  is  the 
same  act  in  each  instance,  but  it  is  lawful  or  unlawful  ac- 
cording to  the  absence  or  presence  of  a  guilty  knowledge. 
Hence  it  is  fallacious  to  say  that  an  act  which  is  lawful  can 
never  become  unlawful,  and  equally  fallacious  to  say  that, 
though  it  is  lawful  for  a  person  to  refuse  to  sell  to  another,  it 
is  also  lawful  for  the  same  person  in  combination  with  others 
to  likewise  refuse  to  sell  when  such  refusal  forms  part  of  a 
scheme  to  raise  and  maintain  the  price  of  commodities  in 
restraint  of  trade,  and  is  not  the  bona  fide  exercise  of  their 
right  to  refuse  to  sell. 

The  declaration  goes  a  step  farther  and  charges  that  the 
defendants   coerced   other   vendors   of   drugs   and   druggists' 


598    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

supplies  to  abstain  from  selling  those  articles  to  the  plaintiff, 
and  that  they  did  this  by  means  of  threats  of  blacklisting  and 
boycotting  such  vendors  if  they  should  sell  to  the  plaintiff 
whilst  it  was  not  a  member  of  that  combination,  by  reason  of 
which  threats  those  vendors  were  intimidated  and  were  de- 
terred from  selling  to  the  plaintiff.  The  plain  meaning  of  all 
this  is:  The  defendants  notified  the  plaintiff  that,  unless  it 
entered  into  the  union  or  combination,  and  charged  the  same 
prices  which  other  members  thereof  were  required  to  charge, 
the  defendants  would  by  threats  of  coercion,  by  blacklisting, 
and  by  boycotting  other  dealers,  deprive  the  plaintiff  of  the 
ability  to  carry  on  its  lawful  business.  Is  such  an  interference 
with  the  legal  right  of  an  individual  to  conduct  a  lawful 
business  in  a  lawful  way  tolerated  by  the  law  ?  And  can  it  be 
permitted  to  flourish  unscathed  because  no  open  deeds  of  vio- 
lence or  breaches  of  the  peace  have  been  comjnitted?  It 
would  be  a  reproach  to  the  law  if  such  were  the  case.  A 
boycott  means  the  confederation,  generally  secret,  by  many 
persons  whose  intent  is  to  injure  another  by  preventing  all 
persons  from  doing  business  with  him  through  fear  of  in- 
curring the  displeasure,  persecution,  and  vengeance  of  the 
conspirators.  8  Cyc.  639.  The  courts  have  generally  con- 
demned those  combinations  which  are  formed  for  the  purpose 
of  interfering,  otherwise  than  by  lawful  competition,  with 
the  business  affairs  of  others,  and  depriving  them  by  means 
of  threats  and  intimidations  of  the  right  to  conduct  the  busi- 
ness in  which  they  are  engaged  according  to  the  dictates  of 
their  own  judgment.  My  Md.  Lodge  v.  Adt.,  100  Md.  248,  68 
L.  R.  A.  752.  Whilst  an  owner  of  property  has  the  legal  right 
to  refuse  to  sell  it  to  another,  and  whilst,  as  in  the  case  of 
Bohn  Manf.  Co.  v.  N.  W.  Lumbermen  Ass'n,  supra,  several 
owners  may  unite  to  do  the  same  thing,  just  as  laborers  may 
organize  to  improve  their  condition  and  to  secure  better 
wages,  and  in  fact  may  refuse  to  work  unless  such  better 
wages  are  obtained,  still  "the  law  does  not  permit  either  an 
employer  or  employe  to  use  force,  violence,  threats  of  force  or 
threats  of  violence,  intimidation,  or  coercion  to  secure  these 
ends  (My  Md.  Lodge  v.  Adt.,  supra)  ;  nor  does  it  permit  ven- 
dors to  resort,  with  impunity,  to  the  like  means  to  force  or 
compel  others  engaged  in  the  same  business  to  abandon  their 


THE  COMMON  LAW  599 

own  method  of  conducting  a  lawful  business  in  a  lawful  way. 
In  Erdman  et  al.  v.  Mitchell  et  al.,  207  Pa.  79,  63  L.  R.  A.  534, 
99  Am.  St.  Rep.  783,  it  was  held  that  a  conspiracy  by  a  number 
of  persons  that  they  will,  by  threats  and  strikes,  deprive  a 
mechanic  of  the  right  to  work  for  others  because  he  does  not 
join  a  particular  union,  would  be  restrained. 

The  case  at  bar  involves  no  right  of  labor,  but  the  principles 
which  have  upheld  the  jurisdiction  of  courts  to  intervene  to 
prevent  injury  and  loss  that  would  result  to  both  employer 
and  employe,  if  a  threatened  strike  or  boycott  were  not  pre- 
vented, are  broad  enough  to  include  the  situation  presented 
by  the  declaration  now  before  us.     In  the  case  of  Plant  v. 
Woods,  supra,  it  was  held  that  members  of  a  labor  union  were 
entitled  to  an  injunction  restraining  the  members  of  another 
union,,  from  which  they  had  withdrawn,  from  doing  acts  in 
pursuance  of  a  conspiracy  to  compel  their  reinstatement,  by 
appeals  to  their  employers  to  induce  them  to  rejoin  and  to 
discharge  them  in  case   of  refusal,   accompanied  by  threats 
intimating  results  detrimental  to  the  employer's  business  and 
property  in  case  of  a  failure  to  comply,  coercive  in  effect  upon 
the  will,  although  they  committed  no  acts  of  personal  violence 
or  physical  injury  to  property,  where  complainants  have,  been 
injured  by  such  acts,  and  there  is  reason  to  believe  that  fur- 
ther proceedings  of  the   same  kind  are  contemplated  which 
will  result  in  still  more  injury  to  them.     In  the  course  of  the 
judgment  it  was  said :    "  It  is  true  they  committed  no  acts  of 
personal  violence,  or  of  physical  injury  to  the  property,  al- 
though they  threatened  to  do  something  which  might  reason- 
ably be   expected  to  lead  to  such  results.     In  their  threat, 
however,   there   was  plainly  that  which  was  coercive   in   its 
effect  upon  the  will.    Restraint  of  the  mind,  provided  it  would 
be  such  as  would  be  likely  to  force  a  man  against  his  will  to 
grant  the  thing  demanded,   and  actually  has  that   effect,   is 
sufficient  in  cases  like  this."     If  these  facts  warrant  a  court 
of  equity  in  restraining  anticipated  injury,  why  do  they  not 
furnish  a  sufficient  ground  to  enable  a  court  of  law  to  award 
damages   for  the   injury   which   they   have   actually   caused? 
The  coercive  threats  of  blacklisting  and  boycotting  have  been 
as  efficacious  in  restraining  the  minds  of  the  persons  upon 
whom  they  operated  according  to  the  averments  of  the  narr. 


600    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

as  would  have  been  the  consummated  boycott  itself;  and  the 
result  to  the  plaintiff's  business  has  been  just  as  disastrous 
as  though  the  persons  who  have  been  deterred  or  terrorized 
by  these  threats  from  selling  to  it  had  been  in  fact  blacklisted 
by  the  defendants.  The  threat  to  boycott  produced  the  con- 
sequences intended  by  the  defendants  as  completely  as  an 
actual  boycott  would  have  done,  and  it  is  no  answer  for  them 
to  say  that  no  other  overt  act,  or  no  act  involving  a  breach  of 
the  peace,  was  done  to  make  effective  their  unlawful  com- 
bination. The  threatened  boycott  was  successful.  It  deterred 
persons  from  selling  to  the  plaintiff,  and  as  a  direct  result 
ruined  the  plaintiff's  business.  These  are  the  allegations  of 
the  narr.,  and,  if  proved  to  be  true,  they  show  an  injury  to 
the  plaintiff  as  the  direct  consequence  of  the  lawless  acts  of 
an  unlawful  confederation,  and  entitle  the  plaintiff  to  recover. 

The  threat  to  injure  the  business  of  the  persons  who  might 
sell  to  the  plaintiff  was  just  as  efficacious  in  preventing  them 
from  doing  the  thing  they  were  warned  not  to  do,  and  there- 
fore just  as  potent  in  causing  damage  to  the  plaintiff,  as  an 
actual  boycott  would  have  been.  A  threat  is  any  menace  of 
such  a  nature  and  extent  as  to  unsettle  the  mind  of  the  person 
on  whom  it  operates,  and  to  take  away  from  his  acts  that 
free,  voluntary  action  which  alone  constitutes  consent.  And. 
Law  Die.  That  such  a  threat,  coupled  with  the  damage  neces- 
sarily flowing  from  it  in  the  prosecution  of  a  conspiracy  to  do 
an  unlawful  thing,  is  sufficient  to  constitute  a  good  cause  of 
action,  has  repeatedly  been  decided.  The  principle  is  stated 
by  Mr.  Addison  in  these  words:  "Injuries  to  property  in- 
directly brought  about  by  menaces,  false  representations  or 
fraud  create  as  valid  a  cause  of  action  as  any  direct  injury 
from  force  or  trespass.  Thus,  if  the  plaintiff's  tenants  have 
been  driven  away  from  their  holdings  by  the  menaces  of  the 
defendant,  damages  are  recoverable  for  the  wrong  done." 
Addison,  Torts,  20.  The  threats  were  overt  acts  in  the  scheme 
of  the  conspiracy,  and  were  as  effective  in  accomplishing  the 
result  intended  to  be  attained  as  would  have  been  an  agency 
or  instrument  of  physical  force  had  it  been  resorted  to. 

The  damages  alleged  to  have  followed  the  acts  and  conduct 
of  the  defendants  are  charged  to  be  the  direct  and  necessary 
results  of  those  acts  and  that  conduct.    Every  element,  there- 


THE  COMMON  LAW  601 

fore,  which  is  required  to  make  out  a  valid  cause  of  action  is 
distinctly  set  forth  in  the  narr.,  and  the  demurrer  should  have 
been  overruled,  unless  there  has  been  a  misjoinder  of  defend- 
ants. It  is  insisted  that  the  retail  drug  association  should  not 
have  been  made  a  party,  but  the  answer  to  this  objection  is 
found  in  the  narr.  itself,  since  by  appropriate  averments  it 
charges  that  defendant  with  a  complicity  in  and  as  being  the 
medium  to  execute  the  various  illegal  acts  which  go  to  make 
up  the  cause  of  action. 

Of  course,  what  has  been  said  must  be  understood  as  apply- 
ing to  the  case  as  made  by  the  pleadings.  We  know  nothing 
of  or  concerning  the  facts  which  a  trial  of  the  issues  may 
elicit. 

For  the  error  committed  in  sustaining  the  demurrer,  the 
judgment  will  be  reversed,  with  costs. 

Judgment  reversed,  with  costs  above  and  below,  and  new 
trial  awarded. 


CENTRAL   SHADE   ROLLER  CO.   v.   CUSHMAN 
(Supreme  Judicial  Court  of  Mass.,  1887.    143  Mass.  353.) 

Bill  in  equity  for  an  account,  and  for  an  injunction  to 
restrain  the  defendant  from  violating  an  agreement  made  by 
him  with  the  plaintiff.  Hearing  in  the  supreme  court  on  the 
demurrer  of  the  defendant,  before  Devens,  J.,  who  sustained 
the  demurrer,  and  the  plaintiff  appealed.  The  facts  are  stated 
in  the  opinion. 

J.  B.  Warner,  for  plaintiff. 

The  attempt  to  apply  to  this  subject  the  rules  which  forbid 
a  restraint  of  trade  is  without  precedent.  Morse  Twist-drill 
Co.  V.  Morse,  103  Mass.  73;  Taylor  v.  Blanchard,  13  Allen, 
370,  373;  Vickery  v.  Welch,  19  Pick.  523;  Leather  Cloth  Co. 
V.  Lorsont,  L.  R.  9  Eq.  345;  Printing,  etc.,  Co.  v.  Sampson, 
L.  R.  19  Eq.  462;  Peabody  v.  Norfolk,  98  Mass.  452.  The 
burden  is  upon  the  defendant  to  make  it  "plainly  and  ob- 
viously clear  that  the  contract  is  against  public  policy;  such 
being  the  burden  upon  a  party  who  seeks  to  put  a  restraint 
upon  the  freedom  of  contract."     Rousillon  v.  Rousillon,   14 


602    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Ch.  Div.  351,  365 ;  Phippen  v.  Stickney,  3  Mete.  384 ;  Marsh  v. 
Russell,  66  N.  Y.  28g;  Steams  v.  Barrett,  1  Pick.  443,  450; 
Morris  v.  Colman,  18  Ves.  437 ;  Wallis  v.  Day,  2  Mees.  &  W.  273. 
See  Mitchel  v.  Reynolds,  1  P.  Wms.  181 ;  S.  C.  1  Smith,  Lead.  Gas. 
756;  Gale  v.  Reed,  8  East,  80.  An  agreement  to  sell  the  entire 
product  of  the  business  to  one  party,  who  agrees  to  buy  it,  cannot 
possibly  be  a  restraint.  Schwalm  v.  Holmes,  49  Cal.  665 ;  Long 
V.  Towl,  42  Mo.  545;  Wiggins  Ferry  Co.  v.  Chicago  &  A.  R. 
Co.,  73  Mo.  389;  Ainsworth  v.  Bentley,  14  Wkly.  Rep.  630; 
Perkins  v.  Lyman,  9  Mass.  521 ;  Barfield  v.  Nicholson,  2  Sim. 
&  S.  1;  Stiff  V.  Cassell,  2  Jur.  (N.  S.)  348;  Ingram  v.  Stiff,  5 
Jur.  (N.  S.)  947. 

The  cases  in  which  agreements  to  prevent  competition  have 
been  adjudged  illegal  are  usually  those  where  the  end  is 
accomplished  by  a  wholesale  restraint  of  trade,  as  in  contracts 
not  to  manufacture,  or  not  to  sell  at  all,  or  except  by  per- 
mission of  an  association.  Hilton  v.  Eckersley,  6  El.  &  Bl. 
47 ;  Hornby  v.  Close,  L.  R.  2  Q.  B.  153 ;  Central  Ohio  Salt  Co.  v. 
Guthrie,  35  Ohio  St.  666;  India  Bagging  Ass'n  v.  Kock,  14 
La.  Ann.  168 ;  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa. 
St.  173;  Arnot  v.  Pittston  &  Elmira  Coal  Co.,  68  N.  Y.  558; 
Raymond  v.  Leavitt,  46  Mich.  447;  Craft  v.  McConoughy,  79 
111.  346 ;  Stanton  v.  Allen,  5  Denio,  434,  See  Phippen  v.  Stick- 
ney, 3  Mete.  384;  Gibbs  v.  Smith,  115  Mass.  592.  It  is  not  a 
principle  of  law  that  competition  is  to  be  guarded  to  the 
extent  of  prohibiting  an  honest  combination  of  persons  having 
similar  interests.  Collins  v.  Locke,  4  App.  Cas.  674;  Wickens 
V.  Evans,  3  Younge  &  J.  318;  Skrainka  v.  Scharringhausen, 
8  Mo.  App.  522 ;  1  Wood,  Ry.  Law,  600 ;  Central  Trust  Co.  v. 
Ohio  Cent.  Ry.,  23  Fed.  Rep.  306;  Hare  v.  London  &  N.  W. 
Ry.  Co.,  2  Johns.  &  H.  80;  Mallan  v.  May,  11  Mees.  &  W.  653, 
665 ;  Griffiths  v.  Earl  of  Dudley,  9  Q.  B.  Div.  357,  364 ;  Perkins 
V.  Lyman,  9  Mass.  521 ;  Palmer  v.  Stebbins,  3  Pick.  188 ;  Com. 
V.  Hunt,  4  Mete.  Ill,  130 ;  Carew  v.  Rutherford,  106  Mass.  1 ; 
Bowen  v.  Matheson,  14  Allen,  499 ;  Snow  v.  Wheeler,  113  Mass. 
179;  Long  V.  Towl,  42  Mo.  545,  549.  If  any  danger  is  appre- 
hended from  the  possible  abuse  of  powers  of  combination,  we 
submit  that  the  court  should  wait  until  it  has  a  clear  case  of 
illegal  action  within  the  limits  already  recognized  by  the  law. 
It  cannot  be  well  to  meet  the  possible  evil,  which  may  never 


THE  COMMON  LAW  603 

arise,  by  selecting  an  inoffensive  case  as  the  occasion  for  an 
interference  which  may  be  itself  the  greater  evil.  Master 
Stevedores'  Ass'n  v.  Walsh,  2  Daly,  1. 

Moorfield  Storey,  for  respondent. 

The  contract  is  clearly  in  restraint  of  trade,  and  therefore 
void.  Certainly  a  court  of  equity  will  not  enforce  it.  Craft 
V.  McConoughy,  79  111.  346;  Raymond  v.  Leavitt,  46  Mich. 
447;  India  Bagging  Ass'n  v.  Kock,  14  La.  Ann.  168;  Central 
Ohio  Salt  Co.  v.  Guthrie,  35  Ohio  St.  666;  Morris  Run  Coal 
Co.  V.  Barclay  Coal  Co.,  68  Pa.  St.  173;  Stanton  v.  Allen,  5 
Denio  434;  Arnot  v.  Pittston  &  Elmira  Coal  Co.,  68  N.  Y. 
558;  Keeler  v.  Taylor,  53  Pa.  St.  467;  Story,  Eq.  §  292  et  seq.: 
California  &  Hecla  Min.  Co.  v.  Quincy  Min.  Co.,  (N.  Y.  Sup. 

Court)  ;  Saratoga  Co.  Bank  v.  King,  44  N.  Y.  87;  Hartford 

&  N.  H.  R.  R.  V.  New  York  &  N.  H.  R.  Co.,  3  Rob.  (N.  Y.)  411. 

The  court  will  look  through  the  form  to  the  substance. 
Craft  V.  McConoughy,  uhi  supra;  Central  Ohio  Salt  Co.  v. 
Guthrie,  uhi  supra. 

The  fact  that  in  this  case  the  combination  relates  to  articles 
protected  by  patents  is  immaterial. 

The  general  rule  is  modified  where  an  article  is  patented 
only  so  far  as  is  necessary  to  secure  the  patentee  the  fruits  of 
his  patent.  Mitchel  v.  Reynolds,  1  P.  Wms.  181 ;  S.  C.  1  Smith, 
Lead.  Cas.  756  i  Oregon  Steam  Nav.  Co.  v.  Winsor,  20  Wall.  64. 

W.  ALLEN,  J.  The  contract  which  is  sought  to  be  enforced 
by  this  bill  (and  the  validity  of  which  is  the  only  question  pre- 
sented by  the  demurrer  and  argued  by  the  parties)  was  made 
between  the  plaintiff,  of  the  first  part,  and  three  manufac- 
turers, under  several  patents  of  certain  curtain  fixtures  known 
as  "Wood  Balance  Shade-rollers,"  of  the  second  part,  in  pur- 
suance of  an  arrangement  between  the  persons  forming  the 
party  of  the  second  part  that  the  plaintiff  corporation  should 
be  created  for  the  purpose  of  becoming  a  party  to  the  com- 
bination, was  to  prevent,  or  rather  to  regulate,  competition 
between  the  parties  to  it  in  the  sale  of  the  particular  com- 
modity which  they  made. 

This  is  a  lawful  purpose,  but  it  is  argued  that  the  means 
employed  to  carry  it  out — the  creation  of  the  plaintiff  cor- 


604    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

poration  aiid  the  terms  of  the  contract  with  it — are  against 
public  policy  and  invalid. 

The  fact  that  the  parties  to  the  combination  formed  them- 
selves into  a  corporation  of  which  they  were  the  stockholders, 
that  they  might  contract  with  it,  instead  of  with  each  other, 
and  carry  out  their  scheme  through  its  agency,  instead  of  that 
of  a  pre-existing  person,  is  obviously  immaterial,  and  the 
only  ground  upon  which  it  can  be  argued  that  the  contract 
is  invalid  is  the  restraint  it  puts  upon  the  parties  to  it. 

Does  the  contract  impose  a  restraint  as  to  the  manufacture 
on  the  sale  of  balance  and  shade-rollers  which  is  void  as  against 
public  policy?  The  contract  certainly  puts  no  restraint  upon 
the  production  of  the  commodity  to  which  it  relates.  It  puts 
no  obligation  upon  and  offers  no  inducement  to  any  person  to 
produce  less  than  to  the  full  extent  of  his  capacity.  On  the 
contrary,  its  apparent  purpose  is,  by  making  prices  more  uni- 
form and  regular,  to  stimulate  and  increase  production. 

The  contract  does  not  restrict  the  sale  of  the  commodity. 
It  does  not  look  towards  withholding  a  supply  from  the  mar- 
ket in  order  to  enhance  the  price,  as  in  Craft  v.  McConoughy, 
79  111.  346,  and  other  cases  cited  by  the  defendant.  On  the 
contrary,  the  contract  intends  that  the  parties  shall  make 
sales,  and  gives  them  full  power  to  do  so ;  the  only  restrictions 
being  that  sales  not  at  retail  or  for  export  shall  be  in  the  name 
of  the  plaintiff,  and  reported  to  it,  and  the  accounts  of  them 
kept  by  it ;  and  the  provision  that,  when  any  party  shall  estab- 
lish an  agency  in  any  city  or  town  for  the  sale  of  a  roUer 
made  exclusively  for  that  purpose,  no  other  party  shall  take 
orders  for  the  same  roller  in  the  same  place.  To  these  restric- 
tions, clearly  valid,  there  is  added  the  one  which  affords  an 
argument  for  the  invalidity  of  the  contract, — the  restriction 
as  to  price.  That  restriction  is,  in  substance,  that  the  prices 
for  rollers  of  the  same  grade,  made  by  different  parties,  shall 
be  the  same,  and  shall  be,  according  to  a  schedule  contained 
in  the  contract,  subject  to  changes  which  may  be  made  by  the 
plaintiff  upon  recommendation  of  three-fourths  of  its  stock- 
holders. In  effect,  it  is  an  agreement  between  three  makers 
of  a  commodity  that  for  three  years  they  will  sell  it  at  a  uni- 
form price  fixed  at  the  outset,  and  to  be  changed  only  by  con- 
sent of  a  majority  of  them.    The  agreement  does  not  refer  to, 


THE  COMMON  LAW  605 

an  article  of  prime  necessity,  nor  to  a  staple  of  commerce,  nor 
to  merchandise  to  be  bought  and  sold  in  the  market,  but  to  a 
particular  curtain  fixture  of  the  parties'  own  manufacture. 
It  does  not  look  to  affecting  competition  from  outside, — the 
parties  have  a  monopoly  by  their  patents, — but  only  to  restrict 
competition  in  price  between  themselves.  Even  if  such  ah 
agreement  tends  to  raise  the  price  of  the  commodity,  it  is  one 
which  the  parties  have  a  right  to  make.  To  hold  otherwise 
would  be  to  impair  the  right  of  persons  to  make  contracts,  and 
to  put  a  price  on  the  products  of  their  own  industry. 

But  we  cannot  assume  that  the  purpose  and  effect  of  the 
combination  is  to  unduly  raise  the  price  of  the  commodity. 
A  natural  purpose  and  a  natural  effect  is  to  maintain  a  fair 
and  uniform  price,  and  to  prevent  the  injurious  effects,  both  to 
producers  and  consumers,  of  fluctuating  prices  caused  by  un- 
due competition.  When  it  appears  that  the  combination  is 
used  to  the  public  detriment,  a  different  question  will  be  pre- 
sented from  that  now  before  us.  The  contract  is  apparently 
beneficial  to  the  parties  to  the  combination,  and  not  necessarily 
injurious  to  the  public,  and  we  know  of  no  authority  or  reason 
for  holding  it  to  be  invalid  as  in  restraint  of  trade  or  against 
public  policy. 

We  have  not  overlooked  other  provisions  of  the  contract, 
which  were  adverted  to  in  the  argument,  but  we  do  not  find 
anything  which  renders  it  invalid,  or  calls  for  special  con- 
sideration. 

In  the  opinion  of  a  majority  of  the  court,  the  entry  must 
be,  demurrer  overruled.'^ 


QUEEN  INSURANCE  CO.  v.  STATE  OF  TEXAS 

(Supreme  Court  of  Texas,  1893.     86  Texas,  250.)8o 

GAINES,  ASSOCIATE  JUSTICE.    This  action  was  brought 
in  the  name  of  the  state  of  Texas,  by  its  attorney  general, 

79 — See    Skrainka   v.    Scharring-  80 — Only  the  opinion  of  the  court 

hausen,  8  Mo.  App.  522  (twenty-four  is  given,  with  the  portions  omitted, 

competitors  agreed  to  eliminate  com-  as  noted, 
petition   by   selling   through  a  com- 
mon agent  for  six  months,  held  val- 
id). 


606    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

against  the  Texas  Insurance  Club,  an  association  of  insurance 
agents,  and  against  57  foreign  insurance  corporations  doing 
business  in  this  state  under  permits  granted  in  pursuance  of 
the  statutes  of  the  state.  It  is  alleged  in  the  petition  that  the 
Texas  Insurance  Club  was  created  with  the  consent  and  by 
the  procurement  of  the  other  defendants,  with  the  object  of 
organizing  a  combination  for  the  purpose  of  fixing  a  uniform 
rate  of  insurance  throughout  the  state  upon  a  graduated  scale, 
and  of  thereby  preventing  competition  among  each  other,  and 
at  the  same  time  of  establishing  a  fixed  rate  of  commission  to 
be  paid  to  the  agents  of  such  companies.  It  is  claimed  in  the 
petition  that  the  acts  charged  against  the  defendants  show 
an  illegal  combination,  as  defined  and  denounced  in  the  act 
of  March  30,  1889,  entitled  "An  act  to  define  trusts  and  to 
provide  for  penalties  and  punishment  of  corporations,  persons, 
firms  and  associations  of  persons  connected  with  them,  and  to 
promote  free  competition  in  the  state  of  Texas."  Laws  1889, 
p.  141.  It  is  also  claimed  in  the  petition  that  the  combination, 
purposes,  and  acts  of  the  defendants  are  in  restraint  of  trade 
and  contrary  to  public  policy,  and  therefore  illegal  at  com- 
mon law.  The  prayer  was  that  the  Texas  Insurance  Club  be 
dissolved,  and  that  the  permits  of  the  other  defendants  be 
canceled,  or  that  the  defendants  be  enjoined  from  carrying  out 
the  objects  of  the  combination  as  alleged  in  the  petition. 

The  trial  court  held  that  the  act  of  March  30,  1889,  did  not 
apply  to  a  combination  to  fix  rates  of  insurance  or  the  com- 
missions of  the  agents  of  insurance  companies,  and  also  that 
the  act  was  unconstitutional  and  void,  by  reason  of  the  thir- 
teenth section,  which  excepted  from  its  operation  "agricul- 
tural products  and  live  stock  while  in  the  hands  of  the  pro- 
ducer or  raiser;"  and  sustained  a  demurrer  to  so  much  of  the 
petition  as  charged  a  violation  of  that  statute.  However,  the 
demurrer  to  that  part  of  the  petition  which  charged  a  com- 
bination alleged  to  be  illegal  at  common  law  was  overruled; 
and  after  hearing  the  evidence  the  court  held  tliat  the  effective 
allegations  of  the  bill  were  sustained  by  the  proof,  and  en- 
tered a  decree  enjoining  the  defendants  from  making  or  carry- 
ing out  any  agreements  between  them  establishing  fixed  rates 
of  insurance,  or  fixing  the  percentage  of  commissions  to  be 
paid  to  their  agents. 


THE  COMMON  LAW  607 

The  defendants  appealed,  and  the  attorney  general  filed 
cross  assignments  of  error.  The  court  of  civil  appeals  affirmed 
the  judgment  of  the  district  court  in  every  particular,  but  held 
that  the  statute  of  March  21,  1889,  was  invalid,  because  it 
nowhere  in  terms  declared  that  "trusts"  such  as  are  defined 
in  the  first  section  are  illegal. 

Assuming  that  the  whole  case  is  before  us  upon  the  plead- 
ings and  facts  as  determined  by  the  court  of  civil  appeals,  we 
will  proceed  to  dispose  of  the  questions  involved  in  it,  so  far 
as  may  be  necessary  for  its  disposition.  [The  court  then  pro- 
ceeded to  consider  certain  questions  relating  to  the  Act  of 
March  21,  1889,  and  found  that  the  acts  charged  against  the 
defendants  were  not  embraced  within  the  provisions  of  the 
statute.    The  opinion  of  the  court  then  proceeded  as  follows:] 

Having  determined  that  the  acts  charged  against  the  de- 
fendants are  not  embraced  within  the  provisions  of  the  statute, 
it  becomes  necessary  to  decide  whether  or  not  they  are  un- 
lawful at  common  law.  We  have  found  no  direct  decision  in 
any  court  of  last  resort  upon  the  point.  The  decisions  upon 
cases  involving  similar  questions  are  not  altogether  harmonious. 

We  have  seen  that  contracts  in  unreasonable  "restraint  of 
trade"  are  illegal  in  the  sense  that  they  are  not  enforceable. 
Of  these,  there  is  a  well-defined  class, — those  in  which  the 
parties  seek  to  bind  themselves  by  an  agreement  that  one  of 
them  shall  cease  to  pursue  his  vocation.  The  terms  are  usually 
employed  by  the  courts  in  this  sense.  It  is  clear  that  the  com- 
bination in  question  is  not  of  this  class.  But,  employing  the 
terms  in  a  looser  sense,  it  is  frequently  said  that  agreements 
to  raise  or  depress  prices  between  persons  engaged  in  the  same 
business  is  a  combination  in  restraint  of  trade.  That  such 
contracts,  as  applied  to  certain  kinds  of  business,  are  unlawful, 
in  the  sense  that  they  are  not  valid,  there  is  no  doubt ;  but 
whether  the  rule  extends  to  every  class  of  business  is  a  differ- 
ent question.  It  extends  to  a  business  in  which  the  public 
have  a  right,  as  distinguished  from  a  business  which  may  be 
merely  beneficial  to  the  public.  Such  is  the  carrying  trade, 
and  especially  the  business  of  transportation  by  railroad  and 
communication  by  telegraph.  Railroad  and  telegraph  com- 
panies derive  their  right  to  condemn  property  from  the  fact 
that  their  business  is  established  for  a  public  use.     So,  the 


608    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

business  of  gas  companies,  who  have  acquired  a  right  to  lay 
their  pipes  in  the  public  streets,  in  analogy  to  that  of  railroad 
companies,  is  treated  as  public.  People  v.  Chicago  Gas  Trust 
Co.  (111.  Sup.),  22  N.  E.  798. 

Thus  far  we  may  clearly  see  our  way ;  but  when  we  come  to 
a  business  not  public  in  its  character,  in  the  sense  previously 
indicated,  difficulties  arise.  We  take  it  as  being  well  settled 
that  all  the  combinations  among  dealers  in  provisions  or  other 
articles  of  prime  necessity  are  deemed  in  law  contrary  to  pub- 
lic policy,  and  contracts  to  effect  or  carry  out  such  combina- 
tions are  held  void.  Bagging  Ass'n  v.  Kock,  8  Lta,  Ann.  168; 
Lumber  Co.  v.  Hayes,  76  Cal.  387;  Morris  Run  Coal  Co.  v. 
Barclay  Coal  Co.,  68  Pa.  St.  173. 

Combinations  of  this  character  are  commonly  called  "mo- 
nopolies," but  they  are  not  the  technical  monopolies  known  to 
the  common  law.  4  Bl.  Comm.  c.  12,  §  9.  The  doctrine  that 
they  are  illegal  probably  had  its  origin  in  the  laws  against 
forestalling,  regrating,  and  engrossing, — offenses  which,  at  a 
very  early  day  in  England,  were  made  punishable  by  statutes 
which  have  since  been  repealed.  They  were  probably  offenses 
at  common  law,  though  their  precise  nature,  as  defined  in  that 
system,  seems  to  be  obscure.  1  Bish.  Crim.  Law,  (8th  Ed.) 
§525.  According  to  Blaekstone,  "forestalling"  was  defined 
by  the  statute  "to  be  the  buying  or  contracting  for  any  mer- 
chandise or  victual  coming  in  the  way  to  market;  or  dissuad- 
ing persons  from  bringing  their  goods  or  provisions  there,  or 
persuading  them  to  enhance  the  price  when  there;  or  of  any 
practices  to  make  the  market  dearer  to  the  fair  trader;"  and 
"regrating"  "to  be  the  buying  of  corn  or  other  dead  victual 
in  any  market  and  selling  it  again  in  the  same  market  or  within 
four  miles  of  the  place."  "Engrossing"  is  "the  buying  up 
large  quantities  of  corn  or  other  dead  victual  with  intent  to 
sell  them  again."  As  we  have  said,  these  statutes  have  been 
repealed  in  England.  They  were  applicable  to  a  condition  of 
society  which  no  longer  exists.  But  it  is  to  be  presumed  that 
the  common-law  principle  which  underlies  them  is  the  origin 
of  the  modern  doctrine  on  the  subject. 

We  find  that  most  of  the  cases  in  which  agreements  among 
manufacturers  and  dealers  to  increase  the  price  of  their  wares 
and    commodities    related    to    some    merchantable    article    of 


THE  COMMON  LAW  609 

necessity  or  of  great  utility.  In  the  case  of  Bagging  Ass'n  v. 
Kock,  supra,  it  is  said  in  the  opinion  that  bagging  is  an  article 
"of  prime  necessity"  to  cotton  planters.  In  the  elaborate 
opinion  delivered  in  the  trial  court  in  the  Sugar  Refining  Case, 
Judge  Barrett  lays  stress  upon  the  fact  that  sugar  is  "a 
necessary  article  of  commerce."  People  v.  North  River  Sugar 
Refining  Co.,  (Cir.  Ct.)  3  N.  Y.  Supp.  401.  So,  also,  in  the 
opinion  in  the  same  case  in  the  supreme  court.  7  N.  Y.  Supp. 
406,  In  the  opinion  in  the  same  case  in  the  court  of  appeals 
the  question  was  not  discussed,  it  not  being  deemed  necessary 
to  a  decision  of  the  case.  121  N.  Y.  582.  In  Richardson  v. 
Buhl,  (Mich.)  43  N.  W.  1102,  the  court  also  say:  "The  arti- 
cle" in  controversy  "has  come  to  be  regarded  as  one  of 
necessity,  not  only  in  every  household  in  the  land,  but  one  of 
daily  use  by  almost  every  individual  in  the  country."  Similar 
expressions  may  be  found  in  other  eases. 

On  the  other  hand,  in  Roller  Co.  v.  Cushman,  143  Mass.  353, 
an  agreement  between  three  manufacturers  of  shade  rollers 
to  control  the  manufacture  and  sale  of  their  products  was  held 
not  unlawful,  distinctly  upon  the  ground  that  their  wares  were 
not  articles  of  "prime  necessity."  The  doctrine  was  adhered 
to  and  reaffirmed  by  the  same  court  in  the  subsequent  case  of 
Gloucester  Isinglass  &  Glue  Co.  v.  Russia  Cement  Co.,  154 
Mass.  92.  In  the  latter  case  the  court  say:  "Their  contract 
had  no  relation  to  an  article  of  prime  necessity,  or  to  staple 
commodities  ordinarily  bought  and  sold  in  market."  In  most 
of  the  cases  in  which  agreements  between  persons  doing  a 
business  not  of  a  public  character  have  been  held  contrary  to 
public  policy  and  void,  the  contracts  related  not  only  to  arti- 
cles of  commerce,  but  to  staple  commodities. 

Insurance  is  a  mere  contract  of  indemnity  against  a  con- 
tingent loss.  Though  it  is  an  important  aid  to  commerce,  it  is 
not  a  business  of  commerce,  or  one  in  which  the  public  have 
any  direct  right.  No  franchise  is  necessary  for  its  prosecu- 
tion, and  no  one  has  a  right  to  demand  of  an  underwriter  that 
his  property  shall  be  insured  at  any  rate.  Any  individual  may 
execute  a  policy,  and  so  any  company  incorporated  for  the 
purpose  of  insuring  property  may  refuse  to  execute  one,  un- 
less it  be  so  bound  by  its  charter.  Forced  insurance,  for 
obvious  reasons,  is  detrimental  to  the  public  interest,  and  it 

Kale3  R.  of  T.  Vol.  1—39 


610    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

is  therefore  not  probable  that  such  restriction  will  be  found 
in  any  charter. 

Labor  is  necessary  to  production  and  transportation,  and 
tJierefore  it  is  not  merely  an  aid,  but  a  necessity,  of  commerce. 
It  is  advantageous  to  the  public,  and  in  that  sense  they  have 
an  interest  in  it.  The  services  of  professional  men  are  likewise 
indispensable  in  most  civilized  communities,  and  are  presum- 
ably likewise  advantageous  to  the  public.  The  public  have  an 
interest  in  them  in  the  same  sense  in  which  they  have  an  inter- 
est in  the  business  of  insurance. 

It  follows,  therefore,  that  if  insurance  companies  are  to  be 
brought  within  the  rule  that  makes  agreements  to  increase 
the  price  of  merchandise  illegal,  upon  the  ground  that  the 
public  have  an  interest  in  their  business,  agreements  among 
laborers  and  among  professional  men  not  to  render  their  serv- 
ices below  a  stipulated  rate  should  be  held  contrary  to  public 
policy  and  void  upon  the  same  ground. 

Combinations  among  workingmen  to  increase  or  maintain 
their  wages  by  unlawful  means  are  unlawful.  But  are  such 
combinations  unlawful  when  the  only  means  resorted  to  to 
accomplish  their  objects  is  a  refusal  on  part  of  the  parties  to 
the  agreement  to  accept  employment  at  a  lower  rate  of  wages 
than  that  designated  in  the  contract?  This  is  the  nest  ques- 
tion for  determination,  and  it  is  not  without  difficulty. 

In  treating  of  criminal  conspiracies,  Mr.  Bishop  says: 
"Whatever  the  language  of  some  of  the  old  cases,  no  lawyer 
of  the  present  day  would  hold  it  indictable  for  men  simply  to 
associate  to  promote  their  own  interests,  or  specifically  to 
raise  their  wages.  If  the  means  adopted  were  mutual  improve- 
ment of  their  mental  or  physical  powers,  mutual  instruction 
in  their  methods  of  doing  their  work,  mutual  inquiring  and 
imparting  information  as  to  the  wages  paid  in  other  localities, 
or  anything  else  of  a  like  helpful  nature,  severally  enabling 
the  members  to  obtain  higher  wages,  nothing  could  be  more 
commendable,  and  nothing  further  from  the  inhibition  of  the 
law;  or,  if  employers  should  combine  simply  to  reduce  wages, 
not  proposing  any  unlawful  means,  perhaps  we  might  not  so 
much  commend  them,  yet  still  they  would  stand  under  no  dis- 
favor from  the  law, — the  result  of  which  is  that  a  conspiracy 
to  enhance  or  reduce  wages  is  not  indictable  per  se,  while  yet 


THE  COMMON  LAW  611 

it  may  be  so  by  reason  of  proposed  unlawful  means."  2  Bish. 
Crim.  Law,  §  233,  subd,  2.  The  author  then  proceeds  to  con- 
sider certain  means  which  have  been  determined  to  be  unlaw- 
ful, in  which  a  mere  agreement  by  men  not  already  under 
contract  not  to  work  unless  for  a  certain  rate  of  wages  does 
not  seem  to  be  included. 

But  the  matter  seems  to  be  involved  in  some  obscurity.  In 
a  previous  section  the  author  cites  the  remarks  of  distinguished 
English  judges,  including  Lord  Mansfield,  to  the  effect  that 
such  agreements  are  unlawful  in  themselves,  but  adds:  "In 
a  later  case,  Earle,  J.,  perhaps  with  a  view  to  conforming  to 
the  statute  of  6  Geo.  IV,  c.  129,  §  4,  yet  distinctly  qualifying 
the  words  of  Lord  IMansfield,  stated  it  as  settled  that  work- 
men are  at  liberty,  while  they  are  perfectly  free  from  engage- 
ments, and  have  the  option  of  entering  into  employment  or 
not,  to  agree  among  themselves  to  say,  'We  will  not  go  into 
any  employ  unless  we  can  get  a  certain  rate  of  wages.'  " 

Mr.  Freeman,  in  his  note  to  the  case  of  People  v.  Fisher, 
says:  "Recent  decisions  in  England,  and  the  spirit  now  pre- 
vailing there  and  in  this  country,  of  giving  encouragement  to 
workmen  in  their  endeavors  to  associate  themselves  into  or- 
ganizations for  their  mutual  benefit,  have  settled  beyond  ques- 
tion that  unemployed  workmen  may  unite,  and  agree  not  to 
work  unless  for  a  certain  price.  This  is  a  plain  right,  upon 
which  no  doubt  ought  ever  to  have  existed."  28  Amer.  Dec. 
508.  The  learned  annotator  then  quotes:  "The  law  is  clear 
that  workmen  have  a  right  to  combine  for  their  own  protec- 
tion, and  to  obtain  such  wages  as  they  may  choose  to  agree  to 
demand;"  citing  Reg.  v.  Rowlands,  5  Cox  Crim.  Cas.  436,  460. 

In  Com.  V.  Hunt,  4  Mete.  (Mass.)  Ill,  it  was  held  by  the 
supreme  court  of  Massachusetts  that  an  association  among 
journeymen  bootmakers,  in  which  they  bound  themselves  not 
to  work  for  any  person  who  employed  one  not  a  member  of 
the  association,  was  not  indictable  at  common  law.  Following 
that  decision,  that  court  also  held,  in  Bowen  v.  Matheson,  14 
Allen  499,  that  an  agreement  among  certain  defendants  by 
which  they  sought  to  compel  the  plaintiff,  a  shipping  master, 
among  other  things,  to  ship  men  from  them  at  an  established 
rate  of  wages,  was  not  illegal,  and  did  not  give  a  ground  of 
action,  although  the  plaintiff's  business  had  been  damaged  by 


612    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  conspiracy.  So,  also,  in  Carew  v.  Rutherford,  106  Mass. 
10,  they  say  that  "it  is  no  crime  for  any  number  of  workmen 
to  associate  themselves,  and  agree  not  to  work  for  or  deal 
with  certain  men  or  certain  classes  of  men,  or  work  under 
certain  wages  or  without  certain  conditions." 

We  take  it,  therefore,  that  the  weight  of  authority  is  against 
the  proposition  that  such  a  combination  among  workmen  was 
indictable  at  common  law.  It  does  not  follow,  however,  that 
any  agreement  of  that  character  is  not  against  public  policy, 
and  therefore  void;  but  it  is  proper  to  show  that  it  was  not 
an  indictable  offense  at  common  law,  for,  if  so,  any  contract 
in  pursuance  of  such  an  agreement  would  have  been  illegal, 
in  the  sense  that  it  would  not  be  enforceable  in  the  courts. 

Upon  the  question  whether  an  agreement  among  workmen 
to  raise  their  wages  is  contrary  to  public  policy,  as  being  in 
restraint  of  trade,  there  is  some  conflict  in  the  authorities.  In 
Collins  V.  Locke,  4  App.  Cas.  674,  the  judicial  committee  of 
the  privy  council  held  that  a  contract  between  stevedores  in 
a  certain  port,  by  which  they  agreed  to  parcel  out  the  steve- 
doring business,  was  not  void,  as  a  contract  in  restraint  of 
trade,  at  common  law.  The  court  say:  "The  objects  which 
this  agreement  has  in  view  are  to  parcel  out  the  stevedoring 
business  of  the  port  among  the  parties  to  it,  and  to  prevent 
competition  at  least  among  themselves,  and  also,  it  may  be,  to 
keep  up  the  price  to  be  paid  for  the  work.  Their  lordships 
are  not  prepared  to  say  that  an  agreement  having  these  objects 
is  invalid  if  carried  into  effect  by  proper  means, — that  is,  by 
provisions  reasonably  necessary  for  the  purpose, — though  the 
effect  of  them  might  be  to  create  a  partial  restraint  upon  the 
power  of  the  parties  to  exercise  their  trade." 

In  Association  v.  Walsh,  2  Daly,  1,  which  was  a  civil  action, 
it  was  held  that  it  was  not  unlawful  for  workmen  to  agree 
that  they  would  not  work  below  certain  rates,  and  that  a  by- 
law of  an  association  which  provided  a  pecuniary  penalty  for 
the  violation  by  way  of  a  fine  could  be  recovered.  The  decision 
was  not  by  a  court  of  last  resort,  but  the  opinion  is  able, 
learned,  and  exhaustive,  and,  as  it  seems  to  us,  convincing. 
See,  also,  Sayre  v.  Association,  1  Duv.  143. 

In  Ladd  v.  Manufacturing  Co.,  53  Tex.  172,  it  was  also  de- 
cided, in  effect,  that  a  combination  among  the  compressing 


THE  COMMON  LAW  613 

companies  in  the  city  of  Galveston,  by  which  they  increased  the 
prices  for  compressing  cotton,  was  not  unlawful.  This  prop- 
osition is  based  distinctly  upon  the  ground  that  compressing 
cotton  is  not  a  public  business. 

On  the  other  hand,  it  is  held  by  the  supreme  court  of  Illinois, 
in  More  v.  Bennett,  29  N.  E.  888,  that  an  association  of  stenog- 
raphers, one  of  the  objects  of  which  was  to  control  prices  to  be 
charged  for  work  by  its  members,  is  an  illegal  combination, 
and  that  its  rules  would  not  be  enforced  so  as  to  sustain  an 
action  of  one  member  against  another.  The  cases  cited  all 
relate  to  combinations  between  carriers  or  dealers  in,  or  pro- 
ducers of,  staple  articles  of  commerce,  as  the  opinion  itself 
shows.  The  court  also  quote  from  Tiedeman  on  Commercial 
Paper  (section  190),  as  follows:  "All  combinations  of  capi- 
talists or  of  workingmen  for  the  purpose  of  influencing  trade 
in  their  especial  favor  by  raising  or  reducing  prices  are  so  far 
illegal  that  agreements  to  combine  cannot  be  enforced."  The 
cases  cited  by  this  author  do  not  sustain  the  proposition. 
Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173,  was  a 
combination  to  affect  the  price  of  coal.  Stanton  v.  Allen,  5 
Denio,  434,  was  an  association  composed  of  the  proprietors  of 
canal  boats  to  regulate  the  rate  of  transportation.  In  the 
other  cases  cited — Brisbane  v.  Adams,  3  N.  Y.  129 ;  Noyes  v. 
Day,  14  Vt.  384;  Doolin  v.  Ward,  6  Johns.  194;  and  Thomp- 
son V.  Davies,  13  Johns.  112 — it  is  simply  held  that  agreements 
to  prevent  competition  in  bidding  at  auction  sales  are  contrary 
to  public  policy,  and  therefore  void.  Combinations  of  that 
character  tend  to  affect  the  price  of  the  thing  to  be  sold,  and 
directly  to  defraud  the  owner.  In  his  work  on  Sales,  the  same 
author  lays  down  the  same  proposition,  and  attempts  to  sus- 
tain it  by  the  same  authorities.  Tied.,  Sales,  §  303.  Notwith- 
standing our  great  respect  for  the  court  which  made  the  de- 
cision, we  cannot  concur  in  the  doctrine  announced  in  the  case 
of  More  v.  Bennett.  It  is  opposed  to  the  well-considered  cases 
on  the  same  point  which  we  have  previously  cited,  and  which 
as  we  think,  lay  down  the  correct  rule. 

Now,  the  business  of  stevedores  is  essential  to  maritime 
commerce,  and  that  of  compressing  cotton  is  an  important  aid 
to  traffic  in  that  staple.  In  that  particular,  neither  are  sec- 
ondary to  the  business  of  insurance.    The  public  has  an  interest 


614    COI^IBINATIONS  AND  RESTRAINT  OF  TRADE 

in  the  one,  just  as  it  has  in  the  others;  and,  if  it  be  law  that 
those  engaged  in  lading  ships  and  in  compressing  cotton  may 
combine  to  regulate  their  charges,  we  see  no  good  reason  why 
insurance  companies  may  not  combine  for  a  similar  purpose. 
The  same  may  be  said  of  lawyers,  physicians,  dentists,  and 
others  pursuing  like  occupations,  in  which  many  persons  may 
have  an  interest  in  the  services  to  be  performed. 

But  there  is  a  stronger  reason  for  holding  illegal  combina- 
tions to  enhance  prices  among  those  engaged  in  occupations 
which  are  licensed,  and  are  protected  from  unlicensed  com- 
petition, than  among  those  of  whom  no  such  license  is  required. 
In  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173, 
Judge  Agnew,  who  delivered  the  opinion,  puts  the  case  very 
strongly  against  a  combination  among  coal  companies  to  con- 
trol the  market,  and  yet  says:  "To  fix  a  standard  of  prices 
among  men  in  the  same  employment,  as  a  fee  bill,  is  not  in 
itself  criminal,  but  may  become  so  when  the  parties  resort  to 
coercive  restraint  or  penalties  upon  the  employe  or  employers, 
or,  what  is  worse,  to  force  of  arms."  For  these  reasons,  we 
conclude  that  the  combination  in  this  case  is  not  illegal  at 
common  law. 

But,  if  it  should  be  determined  that  the  combination  charged 
in  the  petition  is  so  far  illegal  as  to  make  any  contract  grow- 
ing out  of  it  void  at  common  law,  we  are  not  prepared  to  say 
that  it  would  either  subject  the  corporations  engaged  in  it  to 
a  forfeiture  of  their  franchises,  or  to  be  enjoined  at  the  suit 
of  the  state.  The  application  of  either  rule  would  result  in 
grave  consequences.  A  corporation  which  exceeds  its  powers 
in  an  important  particular  commits  a  breach  of  an  implied 
condition  of  its  contract,  and  may  be  properly  held  subject  to 
the  penalty  of  a  forfeiture. 

But  the  sanction  of  a  rule  of  law  which  holds  a  contract 
not  made  punishable  merely  void  as  against  public  policy  is 
ordinarily  simply  to  refuse  the  parties  any  remedy  for  its 
enforcement,  and  it  may  be  doubted  whether  the  courts  would 
interfere  to  enjoin  their  performance.  The  courts  may  com- 
mand parties  to  a  legal  contract  in  restraint  of  trade  to  refrain 
from  violating  its  provisions,  but  can  they  enjoin  a  party  to  a 
contract  merely  void  to  refram  from  its  performance?  The 
rule  is  to  leave  the  parties  as  they  have  left  themselves.     If 


THE  COMMON  LAW  615 

the  contract  be  executory,  a  court  will  not  enforce  it  in  favor 
of  one  claiming  under  it;  if  executed,  it  will  not  rescind  it  at 
the  suit  of  a  party  claiming  against  it.  The  public  policy 
which  creates  the  rule  in  these  cases,  it  seems  to  us,  has  gone 
no  further  in  providing  a  sanction  for  its  enforcement  than  to 
refuse  a  remedy  in  the  courts  to  either  party  to  the  agreement. 

The  North  River  Sugar  Refining  Case  was  tried,  and  ap- 
pealed to  the  supreme  court  in  bane,  and  thence  an  appeal  was 
again  taken  to  the  court  of  appeals.  It  was  stubbornly  con- 
tested and  argued  with  distinguished  ability  on  both  sides  at 
every  stage  of  its  progress.  In  the  opinion  of  the  trial  judge, 
stress  is  laid  upon  the  fact  that  the  tendency  of  the  combina- 
tion was  to  create  a  monopoly  in  restraint  of  trade.  3  N.  Y. 
Supp.  401.  In  the  supreme  court  this  is  made  a  principal 
ground  upon  which  the  opinion  of  the  court  is  based.  The 
opinion  recognizes  that  it  was  a  conspiracy  in  restraint  of  trade 
under  the  statute  of  New  York,  and  an  indictable  offense.  7 
N.  Y.  Supp.  406.  But  it  is  notable  that  the  court  of  appeals 
expressly  waive  any  consideration  of  that  question,  and  hold 
that  the  defendant  corporation  had  subjected  its  charter  to 
forfeiture,  by  reason  of  its  having  exceeded  its  powers  in 
forming  with  other  corporations  a  trust  in  the  nature  of  a 
partnership.  It  may  be  that  to  restrain  a  party  from  perform- 
ing a  contract  merely  void  at  common  law,  as  being  contrary 
to  public  policy,  would  be  to  violate  the  rule  which  leaves  all 
the  parties  to  suffer  the  consequence  of  their  improvident  en- 
gagements of  such  a  character,  and  gives  relief  to  none ;  but 
this  would  not  apply  if  the  interest  of  a  third  person  was  to 
be  affected.  The  question  is  not  without  difficulty,  and,  since 
its  determination  is  not  necessary  to  this  case,  we  do  not  decide 
it.  It  may  be  that  a  thorough  examination  of  the  authorities 
would  show  that  it  is  settled. 

We  would  not  be  understood  as  holding  that  the  combina- 
tion declared  in  this  case  is  not  detrimental  to  the  public,  and 
that  sound  policy  does  not  demand  the  suppression  of  that  and 
all  like  organizations  of  a  similar  magnitude.  There  are  cer- 
tain contracts,  and  perhaps  combinations,  which  the  law  re- 
gards as  being  against  public  policy.  The  courts  cannot  ex- 
tend the  rule  merely  by  reason  of  their  opinion  as  to  what  the 
law  ought  to  be.    What  other  combinations  or  contracts  should 


616    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

be  held  illegal  on  the  ground  of  public  policy  is  a  political 
question, — that  is  to  say,  one  which  it  is  the  province  of  the 
legislative  department  of  the  government  to  determine.  The 
legislature  has  power  to  weigh  the  public  interest  even  "in 
golden  scales, ' '  and,  if  such  combinations  be  found  detrimental, 
they  can  denounce  the  evil,  and  provide  the  remedy. 

It  follows  that  we  are  of  opinion  that  this  action  cannot  be 
maintained,  and  therefore  the  judgments  both  of  the  court  of 
civil  appeals  and  of  the  district  court  are  reversed,  and  judg- 
ment is  here  rendered  for  the  defendants  in  the  latter  court, 
the  plaintiffs  in  error  in  this  court. 

Reversed  and  render ed.^^ 


ONTARIO  SALT  CO.  v.  MERCHANTS  SALT  CO. 

(Court  of  Chancery  of  Ontario,  1871.    18  Grant  (U.  C.)  540.) 

STRONG,  V.  C.  The  bill  in  this  case  is  filed  by  the  Ontario 
Salt  Company  and  five  other  companies,  all  incorporated  un- 
der the  provisions  of  the  general  Acts  of  the  Legislature 
relating  to  joint  stock  companies,  and  several  individuals  as 
plaintiffs,  against  the  Merchants  Salt  Company,  a  corporation 
also  constituted  under  the  general  Acts  referred  to;  and  it 
seeks  to  have  the  defendants  restrained  from  doing  certain 
acts  in  contravention  of  covenants  contained  in  an  indenture 
made  between  the  plaintiffs  and  defendants.  This  indenture 
the  bill  alleges  to  have  been  entered  into  "with  the  view  of 
successfully  working  the  business  of  salt  manufacturing,  and 
to  further  develop  and  extend  the  same,  and  for  the  purpose 
of  procuring  and  assuring  combined  action  and  mutual  pro- 
tection in  their  said  business."  By  the  indenture  the  plaintiffs 
and  defendants  agreed  "to  combine  and  amalgamate  and  unite 
under  the  name  of  the  Canadian  Salt  Association  for  the  pur- 
poses stated  in  the  recital  of  the  said  agreement  of  mutual 
protection  in  the  general  management  of  salt  operations,  for 

81 — See  Aetna  Ins.  Co.  v.  Com-  ject   to    indictment   for    conspiracy, 

monwealth,  106  Ky.  864   (where  it  but  the  court  arguendo,  assumed  that 

was  held  that  the  members  of  the  the  association  was  illegal,  p.  880). 
insurance  association  were  not  sub- 


THE  COMMON  LAW  617 

the  purpose  of  selling  on  such  terms  as  to  secure  as  far  as 
possible  a  fair  share  for  their  capital  invested  in  such  opera- 
tions, and  generally  for  the  purposes  of  combined  action  and 
mutual  protection  in  all  matters  relating  to  the  manufacture 
and  sale  of  salt  in  Canada  and  elsewhere,"  The  bill  further 
states  as  follows:  "The  said  agreement  provided  for  the  ap- 
pointment of  trustees  from  among  and  by  whom  a  president 
and  vice-president  were  to  be  appointed ;  and  the  said  trustees 
were  also  to  appoint  and  provide  for  the  payment  of  such  other 
officers  or  agents  as  they  might  deem  necessary  for  fully  and 
effectually  carrying  out  the  agreement,"  and  that  in  pursuance 
of  the  agreement  trustees  and  officers  were  appointed.  It  is 
also  alleged  by  the  bill  that  "the  agreement  provides  that  all 
the  parties  to  it  should  sell  all  salt  manufactured  by  them 
through  the  trustees  of  the  association,  and  should  sell  none 
except  through  the  said  trustees;"  and  that  no  party  should 
be  permitted  to  withdraw  from  the  agreement  until  six  months 
after  its  date,  and  then  not  until  after  three  months'  notice. 

This  bill  was  demurred  to  for  want  of  equity.  Upon  the 
argument  of  the  demurrer,  the  learned  counsel  for  the  defend- 
ants insisted  upon  the  following  points:  First,  that  the  agree- 
ment set  forth  in  the  bill  was  contrary  to  public  policy  as 
tending  to  a  monopoly.  Secondly,  that  it  was  void  as  being  in 
undue  restraint  of  trade.  Thirdly,  that  it  was  a  contract  ultra 
vires  of  the  defendants  and  such  of  the  plaintiffs  as  are  incor- 
porated companies.  Fourthly,  that  it  was  an  agreement  of 
such  a  peculiar  nature  that,  even  though  binding  at  law,  this 
Court  would  not  enforce  it;  and  lastly,  that  the  Court  ought 
to  decline  to  interfere  on  the  ground  of  hardship. 

I  am  of  opinion  that  on  none  of  these  grounds  ought  this 
demurrer  to  be  allowed. 

It  is  out  of  the  question  to  say  that  the  agreement  which  is 
the  subject  of  this  bill  had  for  its  object  the  creation  of  a 
monopoly,  inasmuch  as  it  appears  from  the  bill  that  the  plain- 
tiffs and  defendants  are  not  the  only  persons  engaged  in  the 
production  of  salt  in  this  province,  and  therefore  the  trade  in 
salt  produced  here  by  other  persons,  and  in  salt  imported  from 
abroad,  will  remain  unaffected  by  the  agreement,  except  in  so 
far  as  prices  may  possibly  be  influenced  by  it.  The  objection 
on  this  head  is  rather  that  the  agreement  has  for  its  object 


618    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

the  raising  the  price  of  salt,  and  for  that  reason  is  illegal,  as 
constituting  the  old  common  law  offence  of  "engrossing,"  or 
at  least  is  void  as  being  against  public  policy. 

Engrossing  is  defined  to  be  "the  getting  into  one's  posses- 
sion or  buying  up  large  quantities  of  corn  or  other  dead  victuals 
with  intent  to  sell  them  again."  [Benjamin  on  Sales,  p.  386.] 
In  the  case  of  the  King  v.  Waddington,  [1  East,  143.],  the  de- 
fendant was  convicted  of  the  offence  of  trying  to  raise  the 
price  of  hops  in  the  market,  by  telling  sellers  that  hops  were 
too  cheap,  and  planters  that  they  had  not  a  fair  price  for  their 
crops,  and  for  contracting  for  one-fifth  of  the  produce  of  two 
counties,  when  he  had  a  stock  on  hand  and  did  not  want  to 
buy,  but  merely  to  speculate  how  he  could  enhance  the  price. 
And  Waddington  was  imprisoned  for  four  months  and  fined 
£500,  Mr.  Justice  Grose,  in  pronouncing  sentence,  saying, 
that  "It  would  be  a  precedent  of  v}iost  awful  moment  for  this 
Court  to  declare  that  hops,  which  are  an  article  of  merchan- 
dise, and  which  we  are  compelled  to  use  for  the  preservation 
of  the  common  beverage  of  the  people  of  this  country,  are  not 
an  article  the  price  of  which  it  is  a  crime  by  undue  means  to 
advance,"  The  common  law  which  was  so  severely  applied  in 
this  case  has  since  been  abolished  in  England  by  the  statute  7 
and  8  Vic.  cap.  24;  and  although  I  have  been  unable  to  dis- 
cover that  any  similar  legislation  has  taken  place  in  this  coun- 
try, I  cannot  suppose  that  a  law  which  would  strike  at  a  vast 
number  of  transactions  which,  with  manifest  benefit  and  profit 
to  the  community,  are  daily  being  entered  into  without  the 
least  suspicion  on  the  part  of  those  engaged  in  them  that  they 
are  doing  wrong,  would  now  be  applied  as  part  of  our  com- 
mon law.  As  regards  the  United  States,  Mr.  W.  Story,  in  his 
Treatise  on  Sales,  at  p.  647,  says:  "These  three  prohibited 
acts"  (referring  to  engrossing  and  the  kindred  offences  of 
forestalling  and  regrating)  "are  not  only  practised  every  day, 
but  they  are  the  very  Life  of  trade,  and  without  them  all  whole- 
sale trade  and  jobbing  would  be  at  an  end.  It  is  quite  safe, 
therefore,  to  consider  that  they  would  not  now  be  held  to  be 
against  public  policy."  I  must  therefore  conclude  that  long 
usage  has  brought  about  such  a  change  in  the  common  law 
since  the  decision  in  the  King  v.  Waddington,  that  even  if  it 
could  be  said  that  the  object  of  the  parties  to  the  agreement 


THE  COMMON  LAW  619 

in  question  here  was  to  enhance  the  price  of  salt,  the  contract 
would  be  neither  illegal  nor  against  public  policy. 

Were  I  to  hold  this  agreement  void  on  any  such  ground,  I 
should  be  laying  down  a  rule,  which  if  applied,  would  cause 
great  inconvenience  in  trade,  and  one,  the  necessity  for  which 
would  at  this  day  be  discountenanced  by  all  public  and  scien- 
tific opinion. 

I  am  far,  however,  from  saying  that  if  this  doctrine  of  the 
King  V.  Waddington  is  still  to  be  considered  as  law,  it  would 
reach  such  an  agreement  as  this.  I  think  a  distinction  would 
be  found  in  the  consideration  that  here  the  article,  the  price 
of  which  was  to  be  regulated,  was  not  to  be  purchased  in  the 
market,  but  was  actually  to  be  produced  by  the  parties  them- 
selves, and  this  product  they  could  not  be  compelled  to  part 
with  except  on  their  own  terms.  Then  the  object  of  the  agree- 
ment was  not  unduly  to  enhance  the  price,  but  as  it  is  expressly 
alleged  in  the  bill,  to  enable  the  parties  by  concerted  action  to 
combat  an  attempt  on  the  part  of  foreign  producers  and  manu- 
facturers unduly  to  depreciate  it.  I  know  of  no  rule  of  law 
ever  having  existed  which  prohibited  a  certain  number  (not 
all)  of  the  producers  of  a  staple  commodity  agreeing  not  to 
sell  below  a  certain  price — and  nothing  more  than  this  has 
been  agreed  to  by  the  parties  here. 

Further,  it  is  expressly  alleged  in  the  bill  that  the  effect  of 
the  deed  was  to  constitute  a  partnership;  and  if  this  is  so, 
there  can  be  nothing  objectionable  in  the  stipulation  that  all 
the  salt  produced — which  is  to  form  the  partnership  stock — • 
should  be  sold  through  the  agency  of  the  trustees.  The  first 
objection  therefore  fails. 

I  cannot  either  agree  that  this  contract  is  void  on  grounds 
of  public  policy,  as  being  in  undue  restraint  of  trade.  The 
law  on  this  subject  is  now  well  settled,  though  there  is  some- 
times much  difficulty  in  applying  it.  Prima  facie  every  con- 
tract in  restraint  of  trade  is  void ;  but  if  an  agreement  appears 
to  be  for  a  partial  restraint  only,  for  valuable  consideration 
and  reasonable,  the  law  sanctions  it. 

Here  there  is  certainly  some  restraint  imposed  by  the  parties 
upon  themselves,  for  they  agree  not  to  sell  except  through  the 
intervention  of  the  common  agents,  such  salt  as  they  may  pro- 
duce.   But  this  is  a  partial  restraint  only ;  they  put  no  restric- 


620    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

tion  on  their  right  to  continue  the  manufacture,  neither  do 
they  stipulate  not  to  sell  at  all,  but  merely  not  to  sell  except 
through  the  medium  of  particular  persons.  Then  the  mutual 
obligations  imposed  by  the  contract  constitute  a  sufficient 
consideration. 

The  remaining  question,  as  to  how  far  the  restraint  is  rea- 
sonable, introduces  the  only  difficulty  to  be  found  in  the  case'. 
In  Horner  v.  Graves,  [7  Bing.  at  743],  Tindal,,  C.  J.,  ex- 
plains the  sense  in  which  the  expression  reasonable  is  to  be 
used  in  this  connection,  as  follows: — "We  do  not  see  how  a 
better  test  can  be  applied  to  the  question,  whether  reasonable 
or  not,  than  by  considering  whether  the  restraint  is  such  only 
as  to  afford  a  fair  protection  to  the  interest  of  the  party  in 
favor  of  whom  it  is  given,  and  not  so  large  as  to  interfere  with 
the  interest  of  the  public." 

The  question  then  here  is,  whether  or  not  this  agreement 
does  do  hurt  to  the  public  interest?  The  authority  principally 
relied  on  by  Mr.  Crooks  was  the  case  of  Hilton  v.  Eckersley, 
[6  E.  &  B,  47,].  There  a  bond  entered  into  by  the  millowners 
of  a  certain  district  in  Lancashire,  conditioned  to  carry  on 
their  works  in  regard  to  wages,  and  the  engaging  of  labourers 
and  time  of  work,  according  to  the  resolutions  of  a  majority 
for  a  period  of  twelve  months,  was  held  void  as  being  in  undue 
restraint  of  trade,  and  so  contrary  to  public  policy.  It  is  to 
be  observed  that  in  Hilton  v.  Eckersley  each  millowner  com- 
pletely surrendered  his  right  of  carrying  on  trade  without 
restraint  to  the  majority  of  the  associates,  who  could  at  any 
moment  they  thought  fit  close  the  mills  altogether.  Before, 
however,  pointing  out  how  far  short  of  the  restraint  imposed 
in  Hilton  v.  Eckersley  the  present  agreement  falls,  I  will  refer 
to  some  general  observations  of  Judges  of  high  authority, 
which  shew  how  carefully  courts  of  justice  ought  to  proceed 
in  determining  what  is  and  what  is  not  against  public  policy. 
In  this  same  case  of  Hilton  v.  Eckersley,  we  find  Lord  Camp- 
bell using  this  language:  "I  enter  upon  such  considerations 
with  much  reluctance  and  with  great  apprehension  when  I 
think  how  different  generations  of  Judges  and  different  Judges 
of  the  same  generation  have  differed  in  opinion  upon  questions 
of  political  economy  and  other  topics  connected  with  the  adju- 
dication of  such  eases;  and  I  cannot  help  thinking  that  where 


THE  COMMON  LAW  621 

there  is  no  illegality  in  bonds  and  other  instruments  at  com- 
mon law,  it  would  have  been  better  that  our  Courts  of  justice 
had  been  required  to  give  effect  to  them,  unless  where  they 
are  avoided  by  Act  of  Parliament." 

Wlien  one  finds  that  Lord  CxVmpbell,  notwithstanding  these 
striking  observations,  decided  that  the  obligors  were  not  bound 
by  their  bond,  it  is  impossible  not  to  feel  the  force  of  the 
somewhat  quaint  illustration  of  Burrough,  J.,  in  Richard- 
son V.  Mellish,  [2  Bing.  at  252],  where  he  says:  "Public 
policy  is  an  unruly  horse,  and  when  once  you  get  astride  it, 
you  never  know  where  it  will  carry  you." 

Again,  commenting  on  Hilton  v.  Eckersley,  the  editors  of 
Smith's  Leading  Cases,  Mr.  Justice  Willes  and  Mr.  Justice 
Keating  say,  [4  edit.  vol.  1,  p.  286]  :  "The  law  upon  this 
subject  is,  it  must  be  confessed,  in  an  unsatisfactory  state, 
and  there  seems  but  too  much  ground  to  fear  that,  unless 
checked  by  a  firm  determination  to  uphold  men's  acts  when 
not  in  violation  of  some  known  rule  of  law,  and  to  treat  de- 
cided cases  having  a  contrary  tendency  as  exceptional,  it  may 
degenerate  into  the  mere  private  discretion  of  the  majority 
of  the  Court  as  to  a  subject  of  all  others  most  open  to  differ- 
ence of  opinion  and  most  liable  to  be  affected  by  changing 
circumstances."  And  in  Richardson  v.  Mellish,  already  cited. 
Best,  C.  J.,  says:  "I  am  not  much  disposed  to  yield  to  argu- 
ments of  public  policy.  I  think  the  Courts  of  Westminister 
Hall  have  gone  much  further  than  they  were  warranted  in 
doing  on  questions  of  policy.  They  have  taken  on  themselves 
sometimes  to  decide  doubtful  questions  of  policy,  and  they 
are  always  in  danger  in  so  doing,  because  Courts  of  law  look 
only  at  the  particular  case,  and  have  not  the  means  of  bring- 
ing before  them  all  those  considerations  which  enter  into  the 
judgments  of  those  who  decide  on  questions  of  policy.  I 
admit  that  if  it  can  be  clearly  put  upon  the  contravention  of 
public  policy,  the  plaintiff  cannot  succeed;  but  it  must  be 
unquestionable — there  must  be  no  doubt." 

After  reading  the  extracts  which  I  have  just  quoted,  it 
requires  no  argument  to  demonstrate  that  decided  cases,  un- 
less the  facts  exactly  resemble  those  of  the  case  for  determina- 
tion, are  of  but  little  assistance  in  questions  of  this  kind.  I 
think,  therefore,  that  Hilton  v.  Eckersley  may  be  disposed  of 


622    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

by  saying  that  the  only  proposition  of  law  which  it  affirms  is 
the  familiar  one  that  contracts  in  restraint  of  trade,  though 
partial,  are  nevertheless  void  if  unreasonable — that  is  against 
public  policy.  That  the  particular  contract  there  in  question 
was  void  on  that  ground,  in  no  way  assists  to  prove  that  the 
totally  dissimilar  contract  in  question  here  is  also  to  be  held 
bad.    The  rule  of  law  is  plain — the  difficulty  is  in  applying  it. 

I  must  therefore  inquire  whether  in  the  present  case  there 
is  "without  doubt"  an  "unquestionable"  interference  with 
the  public  interests  by  reason  of  the  execution  of  this  deed. 

In  the  first  place,  it  must  be  remembered,  that  there  is  here 
no  submission  to  the  will  of  a  majority,  but  that  all  are  placed 
on  an  equal  footing.  Then  there  is  no  restriction  on  the  sale 
of  the  salt,  but  it  is  all  to  be  placed  in  the  hands  of  the  trustees, 
whose  duty  it  is  to  sell  to  the  best  advantage,  the  interest  of 
all  being  alike.  What  is  this  more  than  two  persons  carrying 
on  the  same  trade  binding  themselves  not  to  undersell  each 
other?  And  can  it  be  said  that  such  an  agreement  would  be 
in  restraint  of  trade?  The  only  distinction  between  such  a 
case  and  this  is,  that  in  the  case  put  the  parties  would  be 
subject  to  the  inconvenience  of  having  constantly  to  adjust 
the  prices  with  the  risk  of  frequent  disagreements,  whilst  in 
the  present  case  that  is  obviated  by  leaving  it  to  the  judgment 
of  a  common  agent.  Suppose  two  producers  of  any  article 
agree  to  consign  all  their  produce  to  the  same  agent  and  to 
leave  that  agent  to  sell  for  the  same  price.  How  would  public 
policy  be  infringed  by  such  an  arrangement?  The  argument 
on  the  part  of  the  defendants  might  be  pushed  so  far  as  to 
make  a  partnership  between  two  persons  carrying  on  the  same 
trade  illegal  as  tending  to  lessen  competition.  That  a  contract 
to  charge  the  same  prices  is  not  an  improper  restraint  of 
trade,  was  determined  by  high  authority  in  the  case  of  Heame 
V.  Griffin,  [2  Chitty's  Repts.  407].  That  was  the  case  of  an 
agreement  between  two  coach  masters  not  to  oppose  each 
other  and  to  charge  the  same  prices,  and  it  was  contended 
that  it  was  an  undue  restraint.  But  Lord  Ellenborough 
held  the  contract  to  be  valid,  saying:  "How  can  you  con- 
tend that  it  is  in  restraint  of  trade;  they  are  left  to  charge 
what  they  like,  though  not  more  than  each  other.  This  is 
merely  a  convenient  mode  of  arranging  two  concerns  which 


THE  COMMON  LAW  623 

might  otherwise  ruin  each  other."  I  see  no  difference  in 
principle  between  that  case  and  the  present.  Here,  it  is  true, 
as  I  have  already  remarked,  that  the  regulation  of  price  is 
left  to  third  parties,  the  trustees,  whose  obligations  are  alike 
to  all  the  constituents.  If  authority  is  to  be  referred  to,  the 
case  of  Wickens  v.  Evans,  [3  Y.  &  J.  318],  cited  by  Mr. 
Blake,  is  strongly  in  favor  of  the  plaintiffs  resembling  this 
ease  as  it  does  in  many  of  the  essential  facts. 

I  do  not  follow  Mr.  Crooks  in  his  argument  that  the  number 
of  persons  associated  in  this  arrangement  made  a  difference. 
It  appears  on  the  face  of  the  bill  that  they  are  not  all  the  salt 
producers  in  the  Province,  and  it  also  appears  that  salt,  other 
than  the  produce  of  the  wells  of  the  plaintiffs  and  defendants, 
can  be,  and  is  supplied  to  the  public.  This  being  so,  I  think 
it  makes  no  difference  that  this  agreement  was  entered  into  by 
twenty  persons  engaged  in  the  trade  instead  of  only  two. 

Did  I  even  think  otherwise  than  I  do,  that  this  arrangement 
was  injurious  to  the  public  interests,  I  should  hesitate  much 
before  I  acted  on  such  an  opinion,  for  I  should  feel  that  I  was 
called  on  to  relieve  parties  from  a  solemn  contract,  not  by  the 
mere  application  of  some  well  established  rule  of  law,  but 
upon  my  own  notions  of  what  the  public  good  required — in 
effect  to  arbitrarily  make  the  law  for  the  occasion.  I  can  con- 
ceive no  more  objectionable  instance  of  what  is  called  Judge- 
made  law,  than  a  decision  by  a  single  Judge  in  a  new  and 
doubtful  case  that  a  contract  is  not  to  bind  on  the  ground  of 
public  policy. 

Mr.  Crooks  further  argued  that  the  deed  was  not  binding 
as  being  ultra  vires  of  the  several  parties  who  are  companies 
incorporated  under  the  Provincial  Acts  relating  to  joint  stock 
companies.  Upon  the  allegations  of  the  bill,  I  must  assume 
that  so  far  as  the  individual  members  of  these  companies  are 
concerned,  they  assented  to  the  arrangement  and  to  the  exe- 
cution of  the  deed.  Then  I  take  the  rule  to  be  that  these 
companies,  like  all  corporations,  are  regulated  as  to  their 
powers  by  the  instniment  of  their  creation;  and  that  if  not 
expressed  in  the  statute,  it  is  to  be  implied  that  they  are  to 
engage  in  no  undertaking  foreign  to  the  object  for  which  they 
are  created.  So  far  I  go  with  the  learned  counsel  for  the 
defendants.     But   I   cannot   agree   that   this   arrangement   is 


624    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

foreign  to  the  purpose  of  companies  incorporated  for  the  pur- 
pose of  producing,  manufacturing,  and  selling  salt.  I  regard 
the  agreement  as  one  providing  for  a  particular  mode  of  sell- 
ing salt,  and  therefore  as  being  quite  consistent  with  the  objects 
of  the  company,  and  in  fact  tending  to  the  better  accomplish- 
ment of  those  objects.  I  do  not  think  the  companies  have 
surrendered  their  rights  in  any  respect.  Their  internal  affairs 
will  still  be  managed  as  usual,  and  their  business  will  not, 
under  the  agreement,  be  interfered  with,  save  in  the  single 
matter  of  selling.  The  cases  determining  the  validity  of  traffic 
agreements,  as  they  are  called,  between  competing  railway 
companies,  providing  that  the  gross  earnings  shall  go  into  a 
common  purse  and  be  divided  in  certain  agreed  proportions, 
are  in  point  to  shew  that  this  deed  is  not  ultra  vires. 

It  was  argued  by  Mr.  Maclennan  that,  even  assuming  the 
agreement  to  be  legal  and  binding,  the  case  was  not  a  proper 
one  for  the  interference  of  a  Court  of  equity,  I  must  decide 
against  this  objection  also.  The  breach  of  the  agreement  com- 
plained of  by  the  bill  is,  the  sale  of  salt  in  contravention  of 
the  covenant  not  to  sell  except  through  the  trustees.  The 
right  to  an  injunction  to  restrain  a  breach  of  a  negative  cove- 
nant stands  on  a  different  footing  from  a  right  to  specific  per- 
formance, and  ever  since  1852,  when  Lord  St.  Leonards  de- 
cided, Lumley  v.  Wagner,  [1  Deg.  M.  &  G.  604],  I  believe 
there  has  been  no  doubt  but  that  the  breach  of  such  a  cove- 
nant as  this  would  be  enjoined. 

It  was  lastly  urged  that  the  hardship  of  the  agreement  on 
the  defendants  constituted  a  defence.  I  cannot  see  the  slight- 
est foundation  for  such  an  objection.  All  parties  under  this 
deed  have  equal  rights  and  equal  liabilities.  The  demurrer 
must  he  overruled  with  costs.^^ 

82 — United   States   v.    Nelson,   52  entered    into    for    the    purpose    oi 

Fed.  646,  Nelson,  D.  J.,  said,  p.  647 :  obtaining    the    entire   control    of    it 

' '  An  agreement  between  a  number  with   the   object   of   extortion,   it  is 

of    dealers    and    manufacturers    to  not  objectionable  to  the  statute,  in 

raise  prices,  unless  they  practically  my     opinion.      Competition     is     not 

controlled     the     entire     commodity,  stifled   by   such   an   agreement,   and 

cannot  operate  as  a  restraint  upon  other   dealers  would  soon  force  the 

trade,  nor  does  it  tend  to  injuriously  parties  to  the  agreement  to  sell  at 

affect  the  public.     Unless  the  agree-  the   market   price,    or   a   reasonable 

ment  involves  an  absorption  of  the  price,  at  least. ' ' 
entire    trafQ.c    in    lumber,    and    is 


THE  COMMON  LAW  625 

UNITED  STATES  v.  ADDYSTONE  PIPE  &  STEEL  CO.  et  al. 

(United  States  Circuit  Court  of  Appeals,  Sixth  Circuit,  1898. 

85  Fed.  271.)  83 

Before  Harlan,  Circuit  Justice,  and  Taft  and  Lurton,  Cir- 
cuit Judges. 

TAFT,  C.  J.,  delivered  the  opinion  of  the  court. 

The  first  section  of  the  act  of  congress  entitled  "An  act  to 
protect  trade  and  commerce  against  unlawful  restraints  and 
monopolies,"  passed  July  2,  1890  (26  Stat.  209),  declares  il- 
legal ''every  contract,  combination  in  the  form  of  trust  or 
otherwise  or  conspiracy  in  restraint  of  trade  or  commerce 
among  the  several  states  or  with  foreign  nations."  The  sec- 
ond section  makes  it  a  misdemeanor  for  any  person  to  monopo- 
lize, or  attempt  to  monopolize,  or  combine  or  conspire  with 
others  to  monopolize,  any  part  of  the  trade  or  commerce  among 
the  several  states.  The  fourth  section  of  the  act  gives  the 
circuit  courts  of  the  United  States  jurisdiction  to  hear  and 
determine  proceedings  in  equity  brought  by  the  district  at- 
torneys of  the  United  States  under  the  direction  of  the  attorney 
general  to  restrain  violations  of  the  act. 

Two  questions  are  presented  in  this  case  for  our  decision: 
First.  Was  the  association  of  the  defendants  a  contract,  com- 
bination, or  conspiracy  in  restraint  of  trade,  as  the  terms  are 
to  be  understood  in  the  act?  Second.  Was  the  trade  thus 
restrained  trade  between  the  states? 

The  contention  on  behalf  of  defendants  is  that  the  associa- 
tion would  have  been  valid  at  common  law,  and  that  the  fed- 
eral anti-trust  law  was  not  intended  to  reach  any  agreements 
that  were  not  void  and  unenforceable  at  common  law.  It 
might  be  a  sufficient  answer  to  this  contention  to  point  to  the 
decision  of  the  supreme  court  of  the  United  States  in  U.  S.  v. 
Tran^-Missouri  Freight  Ass'n,  166  U.  S.  290,  in  which  it  was 
held  that  contracts  in  restraint  of  interstate  transportation 
were  within  the  statute,  whether  the  restraints  would  be 
regarded  as  reasonable  at  common  law  or  not.  It  is  suggested, 
however,  that  that  case  related  to  a  quasi  public  employment 

83 — Statement    of    facts    omitted 
and  part  of  the  opinion  only  given. 

Kales  R.  of  T.  Vol.  I — 10 


626    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

necessarily  under  public  control,  and  affecting  public  interests, 
and  that  a  less  stringent  rule  of  construction  applies  to  con- 
tracts restricting  parties  in  sales  of  merchandise,  which  is 
purely  a  private  business,  having  in  it  no  element  of  a  public 
or  quasi  public  character.  Whether  or  not  there  is  substance 
in  such  a  distinction, — a  question  we  do  not  decide, — it  is  cer- 
tain that,  if  the  contract  of  association  Avhich  bound  the  de- 
fendants was  void  and  unenforceable  at  the  common  law 
because  in  restraint  of  trade,  it  is  within  the  inhibition  of  the 
statute  if  the  trade  it  restrained  was  interstate.  Contracts 
that  were  in  unreasonable  restraint  of  trade  at  common  law 
were  not  unlawful  in  the  sense  of  being  criminal,  or  giving 
rise  to  a  civil  action  for  damages  in  favor  of  one  prejudicially 
affected  thereby,  but  were  simply  void,  and  were  not  enforced 
by  the  courts.  Mogul  Steamship  Co.  v.  McGregor,  Cow  &  Co., 
[1892]  App.  Cas.  25;  Hornby  V.  Close,  L.  R.  2  Q.  B.  153;  Lord 
Campbell,  C.  J.,  in  Hilton  v.  Eckersiey,  6  El.  &  Bl.  47,  66; 
Hannen,  J.,  in  Farrer  v.  Close,  L.  R.  4  Q.  B.  602,  612.  The 
effect  of  the  act  of  1890  is  to  render  such  contracts  unlawful 
in  an  affirmative  or  positive  sense,  and  punishable  as  a  mis- 
demeanor, and  to  create  a  right  of  civil  action  for  damages  in 
favor  of  those  injured  thereby,  and  a  civil  remedy  by  injunc- 
tion in  favor  of  both  private  persons  and  the  public  against 
the  execution  of  such  contracts  and  the  maintenance  of  such 
trade  restraints. 

The  argument  for  defendants  is  that  their  contract  of  asso- 
ciation was  not,  and  could  not  be,  a  monopoly,  because  their 
aggregate  tonnage  capacity  did  not  exceed  30  per  cent,  of  the 
total  tonnage  capacity  of  the  country ;  that  the  restraints  upon 
the  members  of  the  association,  if  restraints  they  could  be 
called,  did  not  embrace  all  the  states,  and  were  not  unlimited 
in  space ;  that  such  partial  restraints  were  justified  and  upheld 
at  common  law  if  reasonable,  and  only  proportioned  to  the 
necessary  protection  of  the  parties;  that  in  this  case  the  par- 
tial restraints  were  reasonable,  because  without  them  each 
member  would  be  subjected  to  ruinous  competition  by  the 
other,  and  did  not  exceed  in  degree  of  stringency  or  scope 
what  was  necessary  to  protect  the  parties  in  securing  prices 
for  their  product  that  were  fair  and  reasonable  to  themselves 
and  the  public;  that  competition  was  not  stifled  by  the  asso- 


THE  COMMON  LAW  627 

elation  because  the  prices  fixed  by  it  had  to  be  fixed  with 
reference  to  the  very  active  competition  of  pipe  companies 
which  were  not  members  of  the  association,  and  which  had 
more  than  double  the  defendants'  capacity;  that  in  this  way 
the  association  only  modified  and  restrained  the  evils  of  ruin- 
ous competition,  while  the  public  had  all  the  benefit  from 
competition  which  public  policy  demanded. 

From  early  times  it  was  the  policy  of  Englishmen  to  en- 
courage trade  in  England,  and  to  discourage  those  voluntary 
restraints  which  tradesmen  were  often  induced  to  impose  on 
themselves  by  contract.  Courts  recognized  this  public  policy 
by  refusing  to  enforce  stipulations  of  this  character.  The 
objections  to  such  restraints  were  mainly  two.  One  was  that 
by  such  contracts  a  man  disabled  himself  from  earning  a  live- 
lihood with  the  risk  of  becoming  a  public  charge,  and  deprived 
the  community  of  the  benefit  of  his  labor.  The  other  was  that 
such  restraints  tended  to  give  to  the  covenantee,  the  bene- 
ficiary of  such  restraints,  a  monopoly  of  the  trade,  from  which 
he  had  thus  excluded  one  competitor,  and  by  the  same  means 
might  exclude  others. 

Chief  Justice  Parker,  in  1711,  in  the  leading  case  of 
Mitchel  v.  Reynolds,  1  P.  Wms.  181,  190,  stated  these  objec- 
tions as  follows: 

"First.  The  mischief  which  may  arise  from  them  (1)  to 
the  party  by  the  loss  of  his  livelihood  and  the  subsistence  of 
his  family;  (2)  to  the  public  by  depriving  it  of  an  useful 
member.  Another  reason  is  the  great  abuses  these  voluntary 
restraints  are  liable  to ;  as,  for  instance,  from  corporations  who 
are  perpetually  laboring  for  exclusive  advantages  in  trade, 
and  to  reduce  it  into  as  few  hands  as  possible." 

The  reasons  were  stated  somewhat  more  at  length  in  Alger 
v.  Thatcher,  19  Pick.  51,  54,  in  which  the  supreme  judicial 
court  of  Massachusetts  said: 

"The  unreasonableness  of  contracts  in  restraint  of  trade 
and  business  is  very  apparent  from  several  obvious  considera- 
tions: (1)  Such  contracts  injure  the  parties  making  them, 
because  they  diminish  their  means  of  procuring  livelihoods 
and  a  competency  for  their  families.  They  tempt  improvident 
persons,  for  the  sake  of  present  gain,  to  deprive  themselves  of 
the  power  to  make  future  acquisitions;  and  they  expose  such 


628    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

persons  to  imposition  and  oppression.  (2)  They  tend  to  de- 
prive the  public  of  the  services  of  men  in  the  employments  and 
capacities  in  which  they  may  be  most  useful  to  the  community 
as  well  as  themselves.  (3)  They  discourage  industry  and 
enterprise,  and  diminish  the  products  of  ingenuity  and  skill. 
(4)  They  prevent  competition  and  enhance  prices.  (5)  They 
expose  the  public  to  all  the  evils  of  monopoly ;  and  this  espe- 
cially is  applicable  to  wealthy  companies  and  large  corpora- 
tions, who  have  the  means,  unless  restrained  by  law,  to  ex- 
clude rivalry,  monopolize  business,  and  engross  the  market. 
Against  evils  like  these,  wise  laws  protect  individuals  and  the 
public  by  declaring  all  such  contracts  void." 

The  changed  conditions  under  which  men  have  ceased  to  be 
so  entirely  dependent  for  a  livelihood  on  pursuing  one  trade, 
have  rendered  the  first  and  second  considerations  stated  above 
less  important  to  the  community  than  they  were  in  the  seven- 
teenth and  eighteenth  centuries,  but  the  disposition  to  use 
every  means  to  reduce  competition  and  create  monopolies  has 
grown  so  much  of  late  that  the  fourth  and  fifth  considerations 
mentioned  in  Alger  v.  Thatcher  have  certainly  lost  nothing  in 
weight  in  the  present  day,  if  we  may  judge  from  the  statute 
here  under  consideration  and  similar  legislation  by  the  states. 

The  inhibition  against  restraints  of  trade  at  common  law 
seems  at  first  to  have  had  no  exception.  See  language  of 
Justice  Hull,  Year  Book,  2  Hen.  V,  folio  5,  pi.  26.  After  a 
time  it  became  apparent  to  the  people  and  the  courts  that  it 
was  in  the  interest  of  trade  that  certain  covenants  in  restraint 
of  trade  should  be  enforced.  It  was  of  importance,  as  an 
incentive  to  industry  and  honest  dealing  in  trade,  that,  after 
a  man  had  built  up  a  business  with  an  extensive  good  will,  he 
should  be  able  to  sell  his  business  and  good  will  to  the  best 
advantage,  and  he  could  not  do  so  unless  he  could  bind  him- 
self by  an  enforceable  contract  not  to  engage  in  the  same  busi- 
ness in  such  a  way  as  to  prevent  injury  to  that  which  he  was 
about  to  sell.  It  was  equally  for  the  good  of  the  public  and 
trade,  when  partners  dissolved,  and  one  took  the  business,  or 
they  divided  the  business,  that  each  partner  might  bind  him- 
self not  to  do  anything  in  trade  thereafter  which  would 
derogate  from  his  grant  of  the  interest  conveyed  to  his  former 
partner.     Again,  when  two  men  became  partners  in  a  busi- 


THE  COMMON  LAW  629 

ness,  although  their  union  might  reduce  competition,  this 
effect  was  only  an  incident  to  the  main  purpose  of  a  union 
of  their  capital,  enterprise,  and  energy  to  carry  on  a  success- 
ful business,  and  one  useful  to  the  community.  Kestrictions 
in  the  articles  of  partnership  upon  the  business  activity  of  the 
members,  with  a  view  of  securing  their  entire  effort  in  the 
common  enterprise,  were  of  course,  only  ancillary  to  the  main 
end  of  the  union,  and  were  to  be  encouraged.  Again,  when 
one  in  business  sold  property  with  which  the  buyer  might  set 
up  a  rival  business,  it  was  certainly  reasonable  that  the  seller 
should  be  able  to  restrain  the  buyer  from  doing  him  an  injury 
which,  but  for  the  sale,  the  buyer  would  be  unable  to  inflict. 
This  was  not  reducing  competition,  but  was  only  securing  the 
seller  against  an  increase  of  competition  of  his  own  creating. 
Such  an  exception  was  necessary  to  promote  the  free  purchase 
and  sale  of  property.  Again,  it  was  of  importance  that  busi- 
ness men  and  professional  men  should  have  every  motive  to 
employ  the  ablest  assistants,  and  to  instruct  them  thoroughly ; 
but  they  would  naturally  be  reluctant  to  do  so  unless  such 
assistants  were  able  to  bind  themselves  not  to  set  up  a  rival 
business  in  the  vicinity  after  learning  the  details  and  secrets 
of  the  business  of  their  employers. 

In  a  case  of  this  last  kind,  Mallan  v.  May,  11  Mees.  &  W. 
652,  Baron  Parke  said: 

' '  Contracts  for  the  partial  restraint  of  trade  are  upheld,  not 
because  they  are  advantageous  to  the  individual  with  whom 
the  contract  is  made,  and  a  sacrifice  pro  tanto  of  the  rights 
of  the  community,  but  because  it  is  for  the  benefit  of  the  public 
at  large  that  they  should  be  enforced.  Many  of  these  partial 
restraints  on  trade  are  perfectly  consistent  with  public  con- 
venience and  the  general  interest,  and  have  been  supported. 
Such  is  the  case  of  the  disposing  of  a  shop  in  a  particular  place, 
with  a  contract  on  the  part  of  the  vendor  not  to  carry  on  a 
trade  in  the  same  place.  It  is,  in  effect,  the  sale  of  a  good 
will,  and  offers  an  encouragement  to  trade  by  allowing  a  party 
to  dispose  of  all  the  fruits  of  his  industry.  *  *  *  And 
such  is  the  class  of  cases  of  much  more  frequent  occurrence, 
and  to  which  this  present  case  belongs,  of  a  tradesman,  manu- 
facturer, or  professional  man  taking  a  servant  or  clerk  into 
his  service,  with  a  contract  that  he  will  not  carry  on  the  same 


630    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

trade  or  profession  within  certain  limits.  *  *  *  in  such 
a  case  the  public  derives  an  advantage  in  the  unrestrained 
choice  which  such  a  stipulation  gives  to  the  employer  of  able 
assistants,  and  the  security  it  affords  that  the  master  will  not 
withhold  from  the  servant  instruction  in  the  secrets  of  his 
trade,  and  the  communication  of  his  own  skill  and  experience, 
from  the  fear  of  his  afterwards  having  a  rival  in  the  same 
business." 

For  the  reasons  given,  then,  covenants  in  partial  restraint 
of  trade  are  generally  upheld  as  valid  when  they  are  agree- 
ments (1)  by  the  seller  of  property  or  business  not  to  compete 
with  the  buyer  in  such  a  way  as  to  derogate  from  the  value  of 
the  property  or  business  sold;  (2)  by  a  retiring  partner  not 
to  compete  with  the  firm;  (3)  by  a  partner  pending  the  part- 
nership not  to  do  anything  to  interfere,  by  competition  or 
otherwise,  with  the  business  of  the  firm;  (4)  by  the  buyer  of 
property  not  to  use  the  same  in  competition  with  the  business 
retained  by  the  seller;  and  (5)  by  an  assistant,  servant,  or 
agent  not  to  compete  with  his  master  or  employer  after  the 
expiration  of  his  time  of  service.  Before  such  agreements  are 
upheld,  however,  the  court  must  find  that  the  restraints  at- 
tempted thereby  are  reasonably  necessary  (1,  2,  and  3)  to 
the  enjoyment  by  the  buyer  of  the  property,  good  will,  or 
interest  in  the  partnership  bought;  or  (4)  to  the  legitimate 
ends  of  the  existing  partnership;  or  (5)  to  the  prevention  of 
possible  injury  to  the  business  of  the  seller  from  use  by  the 
buyer  of  the  thing  sold;  or  (6)  to  protection  from  the  danger 
of  loss  to  the  employer's  business  caused  by  the  unjust  use  on 
the  part  of  the  employe  of  the  confidential  knowledge  acquired 
in  such  business.  Under  the  first  class  come  the  cases  of 
Mitchel  V.  Reynolds,  1  P.  Wms.  181 ;  Fowle  v.  Parke,  131  U.  S. 
88;  Nordenfeldt  v.  Maxim  Nordenfeldt  Co.,  [1894]  App.  Cas. 
534;  Rousillon  v.  Rousillon,  14  Ch.  Div.  351;  Cloth  Co.  v. 
Lorsont,  L.  R.  9  Eq.  345;  Whittaker  v.  Howe,  3  Beav.  383; 
Match  Co.  V.  Roeber,  106  N.  Y.  473 ;  Tode  v.  Gross,  127  N.  Y. 
480;  Beal  v.  Chase,  31  Mich.  490;  Hubbard  v.  Miller,  27  Mich. 
15;  National  Ben.  Co.  v.  Union  Hospital  Co.,  45  Minn.  272; 
Whitney  v.  Slayton,  40  Me.  224 ;  Pierce  v.  Fuller,  8  Mass.  222 ; 
Richards  v.  Seating  Co.,  87  Wis.  503.  In  the  second  class  are 
TalHs  V.  Tallis,  1  El.  &  Bl.  391,  and  Lange  v.  Werk,  2  Ohio  St. 


THE  COMMON  LAW  631 

520.  In  the  third  class  are  Machinery  Co.  v.  Dolph,  138  U.  S. 
617,  and  Matthews  v.  Associated  Piress,  136  N.  Y.  333.  In 
the  fourth  class  are  American  Strawboard  Co.  v.  Haldeman 
Paper  Co.,  83  Fed.  619,  and  Hitchcock  v.  Anthony,  Id.  779, 
both  decisions  of  this  court;  Navigation  Co.  v.  Winsor,  20 
Wall.  64;  Dunlop  v.  Gregory,  10  N.  Y.  241;  Hodge  v.  Sloan, 
107  N.  Y.  244.  While  in  the  fifth  class  are  the  cases  of  Homer 
V.  Ashford,  3  Bing.  322 ;  Horner  v.  Graves,  7  Bing.  735 ;  Hitch- 
cock V.  Coker,  6  Adol.  &  E.  454 ;  Ward  v.  Byrne,  5  Mees.  &  W. 
547;  Dubowski  v.  Goldstein,  [1896]  1  Q.  B.  478;  Peels  v. 
Saalfeld,  [1892]  2  Ch.  149;  Taylor  v.  Blanchard,  13  Allen,  370; 
Keeler  v.  Taylor,  53  Pa.  St.  467 ;  Herreshoff  v.  Boutineau,  17 
R.  I.  3,  19  Atl.  712. 

It  would  be  stating  it  too  strongly  to  say  that  these  five 
classes  of  covenants  in  restraint  of  trade  include  all  of  those 
upheld  as  valid  at  the  common  law ;  but  it  would  certainly 
seem  to  follow  from  the  tests  laid  down  for  determining  the 
validity  of  such  an  agreement  that  no  conventional  restraint 
of  trade  can  be  enforced  unless  the  covenant  embodying  it  is 
merely  ancillary  to  the  main  purpose  of  a  lawful  contract, 
and  necessary  to  protect  the  covenantee  in  the  enjoyment  of 
the  legitimate  fruits  of  the  contract,  or  to  protect  him  from 
the  dangers  of  an  unjust  use  of  those  fruits  by  the  other 
party.  In  Horner  v.  Graves,  7  Bing.  735,  Chief  Justice  Tindal, 
who  seems  to  be  regarded  as  the  highest  English  judicial 
authority  on  this  branch  of  the  law  (see  Lord  Macnaughten's 
judgment  in  Nordenfelt  v.  Maxim  Nordenfelt  Co.,  [1894]  App. 
Cas.  535,  567),  used  the  following  language: 

"We  do  not  see  how  a  better  test  can  be  applied  to  the 
question  whether  this  is  or  not  a  reasonable  restraint  of  trade 
than  by  considering  whether  the  restraint  is  such  only  as  to 
afford  a  fair  protection  to  the  interests  of  the  party  in  favor 
of  whom  it  is  given,  and  not  so  large  as  to  interfere  with  the 
interests  of  the  public.  Whatever  restraint  is  larger  than  the 
necessary  protection  of  the  party  requires  can  be  of  no  benefit 
to  either.  It  can  only  be  oppressive.  It  is,  in  the  eye  of  the 
law,  unreasonable.  Whatever  is  injurious  to  the  interests  of 
the  public  is  void  on  the  ground  of  public  policy." 

This  very  statement  of  the  rule  implies  that  the  contract 
must  be  one  in  which  there  is  a  main  purpose,  to  which  the 


632    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

covenant  in  restraint  of  trade  is  merely  ancillary.  The  cov- 
enant is  inserted  only  to  protect  one  of  the  parties  from  the 
injury  which,  in  the  execution  of  the  contract  or  enjoyment  of 
its  fruits,  he  may  suffer  from  the  unrestrained  competition  of 
the  other.  The  main  purpose  of  the  contract  suggests  the 
measure  of  protection  needed,  and  furnishes  a  sufficiently 
uniform  standard  by  which  the  validity  of  such  restraints 
may  be  judicially  determined.  In  such  a  case,  if  the  restraint 
exceeds  the  necessity  presented  by  the  main  purpose  of  the 
contract,  it  is  void  for  two  reasons:  First,  because  it  op- 
presses the  covenantor,  without  any  corresponding  benefit  to 
the  covenantee;  and,  second,  because  it  tends  to  a  monopoly. 
But  where  the  sole  object  of  both  parties  in  making  the 
contract  as  expressed  therein  is  merely  to  restrain  competi- 
tion, and  enhance  or  maintain  prices,  it  would  seem  that  there 
was  nothing  to  justify  or  excuse  the  restraint,  that  it  would 
necessarily  have  a  tendency  to  monopoly,  and  therefore  would 
be  void.  In  such  a  case  there  is  no  measure  of  what  is  neces- 
sary to  the  protection  of  either  party,  except  the  vague  and 
varying  opinion  of  judges  as  to  how  much,  on  principles  of 
political  economy,  men  ought  to  be  allowed  to  restrain  com- 
petition. There  is  in  such  contracts  no  main  lawful  purpose, 
to  subserve  which  partial  restraint  is  permitted,  and  by 
which  its  reasonableness  is  measured,  but  the  sole  object  is 
to  restrain  trade  in  order  to  avoid  the  competition  which  it 
has  always  been  the  policy  of  the  common  law  to  foster. 

Much  has  been  said  in  regard  to  the  relaxing  of  the  original 
strictness  of  the  common  law  in  declaring  contracts  in  re- 
straint of  trade  void  as  conditions  of  civilization  and  public 
policy  have  changed,  and  the  argument  drawn  therefrom  is 
that  the  law  now  recognizes  that  competition  may  be  so 
ruinous  as  to  injure  the  public,  and,  therefore,  that  contracts 
made  with  a  view  to  check  such  ruinous  competition  and 
regulate  prices,  though  in  restraint  of  trade,  and  having  no 
other  purpose,  will  be  upheld.  We  think  this  conclusion  is 
unwarranted  by  the  authorities  when  all  of  them  are  con- 
sidered. It  is  true  that  certain  rules  for  determining  whether 
a  covenant  in  restraint  of  trade  ancillary  to  the  main  purpose 
of  a  contract  was  reasonably  adapted  and  limited  to  the  neces- 
sary protection  of  a  party  in  the  carrying  out  of  such  purpose 


THE  COMMON  LAW  633 

have  been  somewhat  modified  by  modern  authorities.  In  Mit- 
chel  V.  Reynolds,  1  P.  Wms.  181,  the  leading  early  case  on  the 
subject,  in  which  the  main  object  of  the  contract  was  the 
sale  of  a  bake  house,  and  there  was  a  covenant  to  protect  the 
purchaser  against  competition  by  the  seller  in  the  bakery 
business.  Chief  Justice  Parker  laid  down  the  rule  that  it  must 
appear  before  such  a  covenant  could  be  enforced  that  the 
restraint  was  not  general,  but  particular  or  partial,  as  to 
places  or  persons,  and  was  upon  a  good  and  adequate  con- 
sideration, so  as  to  make  it  a  proper  and  useful  contract. 
Subsequently,  it  was  decided  in  Hitchcock  v.  Coker,  6  Adol. 
&  E.  454,  that  the  adequacy  of  the  consideration  was  not  to 
be  inquired  into  by  the  court  if  it  was  a  legal  one,  and  that 
the  operation  of  the  covenant  need  not  be  limited  in  time. 
More  recently  the  limitation  that  the  restraint  could  not  be 
general  or  unlimited  as  to  space  has  been  modified  in  some 
cases  by  holding  that,  if  the  protection  necessary  to  the  cov- 
enantee reasonably  requires  a  covenant  unrestricted  as  to 
space,  it  will  be  upheld  as  valid.  Whittaker  v.  Howe,  3  Beav. 
383;  Cloth  Co.  V.  Lorsont,  L.  R.  9  Eq.  345;  Rousillon  v.  Rou- 
sillon,  14  Ch.  Div.  351 ;  Nordenfeldt  v.  Maxim  Nordenfeldt  Co., 
[1894]  App.  Cas.  535.  See,  also,  Fowle  v.  Park,  131  U.  S  88; 
Match  Co.  V.  Roeber,  106  N.  Y.  473.  But  these  cases  all  in- 
volved contracts  in  which  the  covenant  in  restraint  of  trade 
was  ancillary  to  the  main  and  lawful  purpose  of  the  contract, 
and  was  necessary  to  the  protection  of  the  covenantee  in  the 
carrying  out  of  that  main  purpose.  They  do  not  manifest 
any  general  disposition  on  the  part  of  the  courts  to  be  more 
liberal  in  supporting  contracts  having  for  their  sole  object 
the  restraint  of  trade  than  did  the  courts  of  an  earlier  time. 
It  is  true  there  are  some  cases  in  which  the  courts,  mistaking, 
as  we  conceive,  the  proper  limits  of  the  relaxation  of  the 
rules  for  determining  the  unreasonableness  of  restraints  of 
trade,  have  set  sail  on  a  sea  of  doubt,  and  have  assumed  the 
power  to  say,  in  respect  to  contracts  which  have  no  other 
purpose  and  no  other  consideration  on  either  side  than  the 
mutual  restraint  of  the  parties,  how  much  restraint  of  com- 
petition is  in  the  public  interest,  and  how  much  is  not. 

The  manifest  danger  in  the  administration  of  justice  accord- 
ing to  so  shifting,  vague,  and  indeterminate  a  standard  would 


634    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

seem  to  be  a  strong  reason  against  adopting  it.  The  cases 
assuming  such  a  power  in  the  courts  are  Wickens  v.  Evans,  3 
Younge  &  J.  318;  Collins  v.  Locke,  4  App.  Cas.  674;  Ontario 
Salt  Co.  V.  Merchants'  Salt  Co.,  18  Grant  (U.  C.)  540;  Kel- 
logg V.  Larkin,  3  Pin.  123;  Leslie  v.  Lorillard,  110  N.  Y.  519, 
18  N.  E.  363. 

In  Wickens  v.  Evans,  three  trunk  manufacturers  of  Eng- 
land, who  had  competed  with  each  other  throughout  the  realm 
to  their  loss,  agreed  to  divide  England  into  three  districts, 
each  party  to  have  one  district  exclusively  for  his  trade,  and, 
if  any  stranger  should  invade  the  district  of  either  as  a 
competitor,  they  agreed  "to  meet  to  devise  means  to  promote 
their  own  views."  The  restraint  was  held  partial  and  reason- 
able, because  it  left  the  trade  open  to  any  third  party  in 
either  district.  In  answer  to  the  suggestion  that  such  an 
agreement  to  divide  up  the  beer  business  of  London  among 
the  London  brewers  would  lead  to  the  abuses  of  monopoly,  it 
was  replied  that  outside  competition  would  soon  cure  such 
abuses, — an  ansAver  that  would  validate  the  most  complete 
local  monopoly  of  the  present  day.  It  may  be,  as  suggested 
by  the  court,  that  local  monopolies  cannot  endure  long,  be- 
cause their  very  existence  tempts  outside  capital  into  com- 
petition; but  the  public  policy  embodied  in  the  common  law 
requires  the  discouragement  of  monopolies,  however  tem- 
porary their  existence  may  be.  The  public  interest  may  suffer 
severely  while  new  competition  is  slowly  developing.  The 
case  can  hardly  be  reconciled  with  later  cases,  hereafter  to 
be  referred  to,  in  England  and  America.  It  is  true  that  there 
was  in  this  case  no  direct  evidence  of  a  desire  by  the  parties 
to  regulate  prices,  and  it  has  been  sometimes  explained  on 
the  theory  that  the  agreement  was  solely  to  reduce  the  ex- 
penses incident  to  a  business  covering  the  realm  by  restricting 
its  territorial  extent ;  but  it  is  difficult  to  escape  the  conclusion 
that  the  restraint  upon  each  two  of  the  three  parties  was 
imposed  to  secure  to  the  other  a  monopoly  and  power  to 
control  prices  in  the  territory  assigned  to  him,  because  the 
final  clause  in  the  contract  implies  that,  when  it  was  executed, 
there  were  no  other  competitors  except  the  parties  in  the  terri- 
tory divided. 

Collins  V.  Locke  was  a  case  in  the  privy  council.    The  action 


THE  COMMON  LAW  635 

was  brought  to  enforce  certain  articles  of  agreement  by  and 
between  four  of  the  leading  master  stevedore  contracting 
jBrms  in  Melbourne,  Australia,  who  did  practically  all  the 
business  at  that  port.  The  court  (composed  of  Sir  Barnes 
Peacock,  Sir  Montague  E.  Smith,  and  Sir  Robert  P.  Collier) 
describes  the  scope  and  purposes  of  the  agreement  and  the 
view  of  the  court  as  follows: 

"The  objects  which  this  agreement  has  in  view  are  to  par- 
cel out  the  stevedoring  business  of  the  port  among  the  parties 
to  it,  and  so  to  prevent  competition,  at  least  among  them- 
selves, and  also,  it  may  be,  to  keep  up  the  price  to  be  paid 
for  the  work.  Their  lordships  are  not  prepared  to  say  that 
an  agreement  having  these  objects  is  invalid  if  carried  into 
effect  by  proper  means, — that  is,  by  provisions  reasonably 
necessary  for  the  purpose, — though  the  effect  of  them  might 
be  to  create  a  partial  restraint  upon  the  power  of  the  parties 
to  exercise  their  trade." 

No  attempt  is  made  to  justify  the  view  thus  comprehen- 
sively stated,  or  to  support  it  by  authority,  or  to  reconcile  it 
with  the  general  doctrine  of  the  common  law  that  contracts 
restraining  competition,  raising  prices,  and  tending  to  a 
monopoly,  as  this  is  conceded  by  the  court  to  have  been,  are 
void.  The  court  ignores  the  public  interest  that  prices  shall 
be  regulated  by  competition,  and  assumes  the  power  in  the 
court  to  uphold  and  enforce  a  contract  securing  a  monopoly 
if  it  affect  only  one  port,  so  as  to  be  but  a  partial  restraint 
of  trade.  The  case  is  directly  at  variance  with  the  decision 
of  the  supreme  court  of  Illinois  in  More  v.  Bennett,  140  111. 
69,  hereafter  discussed,  and  cannot  be  reconciled  in  principle 
with  many  of  the  other  cases  cited. 

The  Canadian  case  of  Ontario  Salt  Co.  v.  Merchants'  Salt 
Co.  is  another  one  upon  which  counsel  for  the  defendants 
rely.  That  was  the  decision  of  a  vice  chancellor.  Six  salt 
companies,  in  order  to  maintain  prices,  combined,  and  put 
their  business  under  the  control  of  a  committee,  and  agreed 
not  to  sell  except  through  the  committee.  It  was  held  that 
because  it  appeared  that  there  were  other  salt  companies  in 
the  province,  and  because  the  combiners  denied  that  they  in- 
tended to  raise  prices,  but  only  to  maintain  them,  the  con- 
tract of  union  was  not  in  unlawful  restraint  of  trade.     The 


636    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

conclusion  and  argument  of  the  court  in  Salt  Co.  v.  Guthrie, 
35  Ohio  St.  666,  hereafter  stated,  would  seem  to  be  a  sufficient 
answer  to  this  case. 

Kellogg  V.  Larkin,  3  Pin.  123,  was  an  early  case  in  "Wiscon- 
sin, in  which  the  action  was  on  the  covenant  of  a  warehouse- 
man in  a  lease  of  his  warehouse,  by  which  he  agreed  to  devote 
his  services  to  the  lessee  at  certain  compensation,  and  not  to 
purchase  or  store  wheat  in  the  Milwaukee  market.  The  cov- 
enant was  held  valid.  Had  nothing  else  appeared  in  the  case, 
the  conclusion  would  have  been  clearly  right,  because  such  a 
covenant  might  well  have  been  reasonably  necessary  to  the 
protection  of  the  lessee  in  his  enjoyment  of  the  warehouse 
and  the  good  will  of  the  lessor.  But  it  further  appeared  that 
this  lease,  with  the  covenant,  was  only  one  of  many  such 
executed  by  the  warehousemen  of  Milwaukee  to  the  united 
grain  dealers  of  that  city,  to  enable  the  latter  to  obtain  abso- 
lute control  of  the  wheat  market  in  Milwaukee.  The  court 
held  the  latter  combination  valid  also.  The  decision  cannot 
be  upheld,  in  view  of  the  more  modern  authorities  hereafter 
referred  to. 

The  case  of  Leslie  v.  Lorillard,  110  N.  Y.  519,  would  seem 
to  be  an  authority  against  our  view.  In  that  case  a  stock- 
holder sought  to  restrain  the  payment  of  an  annual  payment 
about  to  be  made  by  the  Old  Dominion  Steamship  Company 
under  a  contract  by  which  it  bought  off  the  Lorillard  Steam- 
ship Company  from  continuing  in  competition  with  it  in 
carrying  passengers  and  freight  between  New  York  and  Nor- 
folk. The  contract  was  held  valid,  although  it  had  no  pur- 
pose except  the  restraining  of  competition,  and,  so  far  as 
appears,  the  obtaining  of  the  complete  control  of  the  business. 
The  case  is  rested  on  Match  Co.  v.  Roeber,  106  N.  Y.  473, 
which  was  a  case  of  the  purchase  of  property  and  good  will. 
It  proceeds  on  the  general  proposition  "that  competition  is 
not  invariably  a  public  benefaction;  for  it  may  be  carried 
on  to  such  a  degree  as  to  become  a  general  evil,"  and  thus 
leaves  it  to  the  discretion  of  the  court  to  say  how  much  com- 
petition is  desirable,  and  how  much  is  mischievous  and  ac- 
cordingly to  determine  whether  a  contract  is  bad  or  not.  The 
case  is  directly  opposed  to  Anderson  v.  Jett,  89  Ky.  375,  here- 
after cited.     It  should  be  said  that  nothing  appears  in  the 


THE  COMMON  LAW  637 

report  of  the  ease  to  show  directly  that  the  purpose  of  the 
contract  was  to  reserve  the  entire  business  to  the  Dominion 
Company,  or  to  secure  to  it  the  power  of  regulating  prices, 
but  this  natural  inference  from  the  terms  of,  the  contract  is 
not  negatived. 

The  case  of  Mogul  Steamship  Co.  v.  McGregor,  Gow  &  Co., 
[1892]  App,  Cas.  25,  has  been  cited  to  sustain  the  position  of 
the  defendants.  It  does  not  do  so.  It  was  a  suit  for  damages, 
brought  by  a  company  engaged  in  the  tea-carrying  trade  at 
Hankow,  China,  against  six  other  companies  engaged  in  the 
same  trade,  for  loss  inflicted  by  an  alleged  unlawful  con- 
spiracy entered  into  by  them  to  drive  the  plaintiff  out  of  the 
trade,  and  to  obtain  control  of  the  trade  themselves.  It 
appeared  that  the  defendants  agreed  to  conform  to  a  plan  of 
association,  by  which  they  should  constantly  underbid  the 
plaintiff,  and  take  away  his  trade  by  offering  exceptional  and 
very  favorable  terms  to  customers  dealing  exclusively  with  the 
members  of  the  association,  and  that  they  did  this  to  control 
the  business  the  next  season  after  he  had  been  thus  driven  out 
of  competition.  It  was  held  by  the  house  of  lords  that  this 
was  not  an  unlawful  and  indictable  conspiracy,  giving  rise  to 
a  cause  of  action  by  the  person  injured  thereby ;  but  it  was  not 
held  that  the  contract  of  association  entered  into  by  the  de- 
fendants was  not  void  and  unenforceable  at  common  law.  Oh 
the  contrary.  Lord  Bramwell,  in  his  judgment  (at  page  46), 
and  Lord  Ilannen,  in  his  (at  page  58),  distinctly  say  that  the 
contract  of  association  was  void  as  in  restraint  of  trade ;  but 
all  the  law  lords  were  of  opinion  that  contracts  void  as  in 
restraint  of  trade  were  not  unlawful  in  a  criminal  sense,  and 
gave  no  right  of  action  for  damages  to  one  injured  thereby. 
The  statute  we  are  considering  expressly  gives  such  contracts 
a  criminal  and  unlawful  character.  It  is  manifest,  therefore, 
that  whatever  of  relevancy  the  Mogul  Steamship  Co.  Case  has 
in  this  discussion  makes  for,  rather  than  against,  our  con- 
clusion. 

Two  other  cases  deserve  mention  here.  They  are  Roller  Co. 
V.  Cushman,  143  Mass.  353,  and  Gloucester  Isinglass  &  Glue 
Co.  V.  Russia  Cement  Co.,  154  Mass.  92.  In  these  cases  it  was 
held  that  contracts  in  restraint  of  trade  are  not  invalid  if  they 
affect  trade  in  articles  which,  though  useful  and  convenient, 


638    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

are  not  articles  of  prime  or  public  necessity,  and  therefore 
contracts  between  dealers  made  to  secure  complete  control  of 
the  manufacture  and  sale  of  such  articles  were  supported.  In 
the  first  case  the  article  involved  was  a  fastening  of  a  certain 
shade  roller,  and  in  the  other  was  glue  made  from  fish  skins. 
We  think  the  cases  hereafter  cited  show  that  the  common  law 
rule  against  restraint  of  trade  extends  to  all  articles  of  mer- 
chandise, and  that  the  introduction  of  such  a  distinction  only 
furnishes  another  opportunity  for  courts  to  give  effect  to  the 
varying  economical  opinions  of  its  individual  members.  It 
might  be  difficult  to  say  why  it  was  any  more  important  to 
prevent  restraints  of  trade  in  beer,  mineral  water,  leather 
cloth,  and  wire  cloth  than  of  trade  in  curtain  shades  or  glue. 
However  this  may  be,  the  cases  do  not  touch  the  case  at  bar, 
because  the  same  court,  in  Telegraph  Co.  v.  Crane,  160  Mass. 
50,  held  that  fire-alarm  telegraph  instruments  were  articles  of 
sufficient  public  necessity  to  render  unreasonable  restraints  of 
trade  in  them  void,  and  certainly  such  articles  are  not  more 
necessary  for  public  use  than  water,  gas,  and  sewer  pipe. 

There  are  other  cases  upon  which  counsel  of  defendants  rely, 
which,  in  our  judgment,  have  no  bearing  on  the  issue,  or,  if 
they  have,  are  clearly  within  the  rules  we  have  already  stated. 
One  is  a  case  in  which  a  railroad  company  made  a  contract 
with  a  sleeping-car  company  by  which  the  latter  agreed  to  do 
the  sleeping-car  business  of  the  railway  company  on  a  number 
of  conditions,  one  of  which  was  that  no  other  company  should 
be  allowed  to  engage  in  the  sleeping-car  business  on  the  same 
line.  Chicago,  St.  L.  &  N.  0.  R.  Co.  v.  Pullman  Southern  Car 
Co.,  139  U.  S.  79.  The  main  purpose  of  such  a  contract  is  to 
furnish  sleeping-car  facilities  to  the  public.  The  railroad  com- 
pany may  discharge  this  duty  itself  to  the  public,  and  allow 
no  one  else  to  do  it,  or  it  may  hire  some  one  to  do  it,  and,  to 
secure  the  necessary  investment  of  capital  in  the  discharge  of 
the  duty,  may  secure  to  the  sleeping-car  company  the  same 
freedom  from  competition  that  it  would  have  itself  in  discharg- 
ing the  duty.  The  restraint  upon  itself  is  properly  proportioned 
to  and  is  only  ancillary  to,  the  main  purpose  of  the  contract, 
which  is  to  secure  proper  facilities  to  the  public.  Exactly  the 
same  principle  applies  to  similarly  exclusive  contracts  with 
express  companies.,  and  stock-vard  delivery  companies.     Ex- 


THE  COMMON  LAW  639 

press  Cases,  117  N.  S.  1,  628 ;  Stock-Yards  Co.  v.  Keith,  139 
U.  S.  128;  Butchers'  &  Drovers'  Stock-Yards  Co.  v.  Louisville 
&  N.  R.  Co.,  31  U.  S.  App.  252,  14  C.  C.  A.  290.  The  fact  is  that 
it  is  quite  difficult  to  conceive  how  competition  would  be  pos- 
sible upon  the  same  line  of  railway  between  sleeping-car  com- 
panies or  express  companies.  Such  contracts  involve  the  haul- 
ing of  sleeping  cars  or  express  cars  on  each  express  train,  the 
assignment  of  offices  in  each  station,  and  various  running  ar- 
rangements, which  it  would  be  an  intolerable  burden  upon  the 
railroad  company  to  make  and  execute  for  two  companies  at 
the  same  time.  And  the  same  is  true  of  contracts  with  a  stock 
delivery  company.  The  railway  company  could  not  ordinarily 
be  expected  to  have  more  than  one  general  station  for  the 
delivery  of  cattle  in  any  one  town.  It  would  only  be  required 
by  the  nature  of  its  employment  to  furnish  such  facilities  as 
were  reasonably  sufficient  for  the  business  at  that  place.  There 
is  hardly  more  objection  on  the  ground  of  public  policy  to 
such  a  restriction  upon  a  railway  company  in  cases  like  these 
than  there  would  be  to  a  restriction  upon  a  lessor  not  to  allow 
the  subject-matter  of  the  lease  to  be  enjoyed  by  any  one  but 
the  lessee  during  the  lease.  The  privilege,  when  granted,  is 
hardly  capable  of  other  than  exclusive  enjoyment.  The  public 
interest  is  satisfactorily  secured  by  the  requirement,  which 
may  be  enforced  by  any  member  of  the  public,  to  wit,  that  the 
charges  allawed  shall  not  be  unreasonable,  and  the  business  is 
of  such  a  public  character  that  it  is  entirely  subject  to  legis- 
lative regulation  in  the  same  interest. 

Having  considered  the  cases  upon  which  the  counsel  for  the 
defendants  have  relied  to  maintain  the  proposition  that  con- 
tracts having  no  purpose  but  to  restrain  competition  and  main- 
tain prices,  if  reasonable,  will  be  held  valid,  we  must  now  pass 
in  rapid  review  the  cases  that  make  for  an  opposite  view. 

In  People  v.  Sheldon,  139  N.  Y,  251,  all  the  coal  dealers  in 
the  city  of  Lockport,  N.  Y.,  entered  into  a  contract  of  associa- 
tion, forming  a  coal  exchange  to  prevent  competition  by  con- 
stituting the  exchange  the  sole  authority  to  fix  the  price  to  be 
charged  by  members  for  coal  sold  by  them,  and  the  price  was 
thus  fixed.  The  court  approved  a  charge  to  the  jury  that  even 
if  this  was  merely  a  combination  between  independent  coal 
dealers  to  prevent  competition  between  themselves  for  the  due 


640    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

protection  of  the  parties  to  it  against  ruinous  rivalry,  and  al- 
though no  attempt  was  made  to  charge  unreasonable  or  exces- 
sive prices,  it  was  inimical  in  trade  and  commerce,  whatever 
might  be  done  under  it,  and  was  within  the  state  statute  mak- 
ing a  conspiracy  injurious  to  trade  indictable.  Said  Andrews, 
C.  J.  (page  264,  139  N.  Y.,  and  page  789,  34  N.  E.) : 

"If  agreements  and  combinations  to  prevent  competition  in 
prices  are  or  may  be  hurtful  to  trade,  the  only  sure  remedy  is 
to  prohibit  all  agreements  of  that  character.  If  the  validity  of 
such  an  agreement  was  made  to  depend  upon  actual  proof  of 
public  prejudice  or  injury,  it  would  be  very  difficult  in  any 
case  to  establish  the  invalidity,  although  the  moral  evidence 
might  be  very  convincing." 

See,  to  the  same  effect,  Judd  v.  Harrington,  139  N.  Y.  105 ; 
Leonard  v.  Poole,  114  N.  Y.  371;  De  Witt  Wire-Cloth  Co.  v. 
New  Jersey  Wire-Cloth  Co.  (Com.  PI.)  14  N.  Y.  Supp.  277. 

In  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173, 
five  coal  companies  controlling  the  bituminous  coal  trade  in 
Northern  Pennsylvania  agreed  to  allow  a  committee  to  fix 
prices  and  rates  of  freight,  and  to  fix  proportion  of  sales  by 
each.  Competition  was  not  destroyed,  because  the  anthracite 
coal  and  Cumberland  bituminous  coal  were  sold  in  competition 
with  this  coal.  The  association  was,  nevertheless,  held  void, 
as  in  illegal  restraint  of  trade  and  competition,  and  tending  to 
injure  the  public.  In  Nester  v.  Brewing  Co.,  161  Pa.  St.  473, 
45  brewers  in  Philadelphia  made  an  agreement  to  sell  beer  in 
Philadelphia  and  Camden  at  a  certain  price  to  be  fixed  by  a 
committee  of  their  number.  Though  beer  could  hardly  be  said 
to  be  an  article  of  prime  necessity  like  coal,  yet,  as  it  was  an 
article  of  merchandise,  the  contract  was  held  void,  as  in  re- 
straint of  trade,  and  tending  to  a  monopoly. 

In  Salt  Co.  V.  Guthrie,  35  Ohio  St.  666,  the  salt  manufac- 
turers of  a  salt  producing  territory  in  Ohio,  with  some  excep- 
tions, combined  to  regulate  the  price  of  salt  by  preventing 
ruinous  competition  between  themselves,  and  agreed  to  sell 
only  at  prices  fixed  by  a  committee  of  their  number.  The 
supreme  court  of  Ohio  held  the  contract  void.  Judge  Mc- 
Ilvaine,  who  delivered  the  opinion  of  the  court,  said: 

"The  clear  tendency  of  such  an  agreement  is  to  establish  a 
monopoly,  and  to  destroy  competition  in  trade,  and  for  that 


THE  COMMON  LAW  641 

reason,  on  the  ground  of  public  policy,  courts  will  not  aid  in 
its  enforcement.  It  is  no  answer  to  say  that  competition  in  the 
salt  trade  was  not  in  fact  destroyed,  or  that  the  price  of  the 
commodity  was  not  unreasonably  advanced.  Courts  will  not 
stop  to  inquire  as  to  the  degree  of  injury  inflicted  upon  the 
public.  It  is  enough  to  know  that  the  inevitable  tendency  of 
such  contracts  is  injurious  to  the  public." 

Other  Ohio  cases  which  presented  similar  facts,  and  in  which 
the  same  rule  was  enforced,  are  Emery  v.  Candle  Co.,  47  Ohio 
St.  320,  and  Hoffman  v.  Brooks,  11  Wkly.  Law  Bui.  258. 

In  Anderson  v.  Jett,  89  Ky.  375,  two  owners  of  steamboats 
running  on  the  Kentucky  river  made  an  agreement  to  keep  up 
rates,  and  divide  net  profits,  to  prevent  ruinous  competition 
and  reduced  rates.    The  contract  was  held  void. 

In  Chapin  v.  Brown,  83  Iowa  156,  the  grocerymen  in  a 
town,  in  order  to  avoid  a  trade  in  butter  which  was  burden- 
some, agreed  not  to  buy  any  butter  or  to  take  it  in  trade 
except  for  use  in  their  own  families,  so  as  to  throw  the  busi- 
ness into  the  hands  of  one  man  who  dealt  in  butter  exclusively. 
The  agreement  was  held  invalid,  because  in  restraint  of  trade, 
and  tending  to  create  a  monopoly. 

In  Craft  v.  McConoughy,  79  111.  346,  five  grain  dealers  in 
Rochelle,  111.,  agreed  to  conduct  their  business  as  if  independent 
of  each  other,  but  secretly  to  fix  prices  at  which  they  would 
sell  grain,  and  to  divide  profits  in  a  certain  proportion.  This 
was  held  void,  as  in  restaint  of  trade,  and  tending  to  create  a 
monopoly.  In  More  v.  Bennett,  140  111.  69,  articles  of  associa- 
tion entered  into  by  only  a  part  of  the  stenographers  of  Chicago 
to  fix  a  schedule  of  prices,  and  prevent  competition  among  their 
members  and  a  consequent  reduction  of  prices,  was  held  void. 
The  court  said: 

"A  combination  among  a  number  of  persons  engaged  in  a 
particular  business  to  stifle  or  prevent  competition,  and  thereby 
to  enhance  or  diminish  prices  to  a  point  above  or  below  what 
they  would  be  if  left  to  the  influence  of  unrestricted  competi- 
tion, is  contrary  to  public  policy.  Contracts  in  partial  restraint 
of  trade  which  the  law  sustains  are  those  entered  into  by  a 
vendor  of  a  business  and  its  good  will  with  its  vendee,  by  which 
the  vendor  agrees  not  to  engage  in  the  same  business  within  a 
limited  territory;  and  the  restraint,  to  be  valid,  must  be  no 

Kales  R.  of  T.  Vol.  1—41 


642    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

more  extensive  than  is  reasonably  necessary  for  the  protection 
of  the  vendee  in  the  enjoyment  of  the  business  purchased." 

As  already  said,  this  case  is  in  direct  conflict  with  Collins  v. 
Locke,  4  App.  Cas,  674,  discussed  above.  To  the  same  effect 
as  More  v.  Bennett  are  Ford  v.  Association,  155  111.  166,  and 
Bishop  V.  Pi-eservers  Co.,  157  111.  284. 

In  Association  v.  Niezerowski,  95  Wis.  129,  the  suit  was  on 
a  note  given  in  pursuance  of  the  secret  rules  of  an  association 
of  60  out  of  the  75  master  masons  in  Milwaukee,  by  which  all 
bids  for  work  about  to  be  let  were  first  made  to  the  associa- 
tion, and  the  lowest  bidder  was  then  required  to  add  6  per 
cent,  to  his  bid,  and,  if  the  bid  was  more  than  8  per  cent,  below 
the  next  lowest  bidder,  more  than  6  per  cent,  might  be  added. 
Each  member  was  required  to  pay  to  the  association  6  per 
cent,  of  his  estimates  when  due,  for  subsequent  distribution. 
In  declaring  the  contract  void,  the  court  said : 

"The  combination  in  question  is  contrary  to  public  policy, 
and  strikes  at  the  interests  of  those  of  the  public  desiring  to 
build,  and  between  whom  and  the  association  or  the  members 
thereof  there  exist  no  contract  relations." 

In  Vulcan  Powder  Co.  v.  Hercules  Powder  Co.,  96  Cal.  510, 
four  powder  companies  of  California  agreed  that  each  should 
sell  at  a  price  to  be  fixed  by  a  committee  of  their  representa- 
tives, and  should  pay  over  to  the  others  the  profits  on  any 
excess  of  sales  over  a  fixed  proportion  of  the  total  sales.  The 
contract  was  held  void. 

In  Oil  Co.  V.  Adoue,  83  Tex,  650,  five  owners  of  cottonseed 
oil  mills  in  Texas  made  an  agreement  not  to  sell  at  less  than 
certain  agreed  prices.  One  guaranteed  profits  to  the  four  oth- 
ers, and  suit  was  brought  on  the  guaranty.  It  was  held  void, 
as  restraining  trade,  and  tending  to  a  monopoly,  even  though 
the  evidence  failed  to  establish  that  it  effected  a  monopoly. 

In  Association  v.  Kock,  14  La.  Ann.  168,  eight  commercial 
firms  in  New  Orleans  holding  a  large  quantity  of  cotton  bag- 
ging entered  into  an  agreement  by  which  they  stipulated  that 
for  three  months  no  member  should  sell  a  bale  except  by  a 
vote  of  the  majority.  It  was  held  that  the  contract  was  "pal- 
pably and  unequivocally  a  combination  in  restraint  of  trade, 
and  to  enhance  the  price  in  the  market  of  an  article  of  primary 
necessity  to  cotton  planters.    Such  combinations  are  contrary 


THE  COMMON  LAW  643 

to  public  order,  and  cannot  be  enforced  in  a  court  of  justice." 

In  Hilton  v.  Eckersley,  6  El.  &  Bl.  47,  it  was  held  that  an 
agreement  between  18  cotton  manufacturers  to  submit  to  the 
control  of  a  committee  of  their  number  for  12  months  the 
question  as  to  prices  to  be  paid  for  labor  and  the  terms  of 
employment,  in  order  to  resist  the  aggressions  of  an  association 
of  workingmen,  was  void  and  unenforceable,  because  in  re- 
straint of  trade. 

In  Urmston  v.  Whitelegg,  63  L.  T.  (N.  S.)  455,  a  case  in  the 
queen's  bench  division,  before  Day  and  Lawrence,  J  J.,  the 
action  was  brought  to  enforce  a  penalty  under  the  rules  of  the 
Bolton  Mineral  Water  Manufacturers'  Association,  which  re- 
cited that  the  object  of  the  association  was  to  maintain  the  price 
of  mineral  water,  and  bound  the  members  for  10  years  not  to 
sell  at  less  than  9d.  a  dozen  bottles,  or  at  least  not  less  than 
any  higher  price  fixed  by  the  committee,  on  penalty  of  £10  for 
each  violation.     Day,  J.,  said: 

"If  a  contract  for  raising  prices  against  the  public  interest 
is  a  contract  in  restraint  of  trade,  this  is  undoubtedly  such  a 
contract.  During  the  last  hundred  years  great  changes  have 
taken  place  in  the  views  of  the  public,  of  the  legislature,  and 
therefore  of  the  judges,  on  the  matter,  and  many  old-fashioned 
offenses  have  disappeared;  but  the  rule  still  obtains  that  com- 
bination for  the  mere  purpose  of  raising  prices  is  not  enforce- 
able in  a  court  of  law.  This  contract  is  illegal  in  the  sense  of 
not  being  enforceable.  It  is  not  necessary  that  it  should  be 
such  as  to  form  the  ground  of  criminal  proceedings." 

In  the  foregoing  cases  the  only  consideration  of  the  agree- 
ment restraining  the  trade  of  one  party  was  the  agreement  of 
the  other  to  the  same  effect,  and  there  was  no  relation  of  part- 
nership, or  of  vendor  and  vendee,  or  of  employer  and  employe. 
Where  such  relation  exists  between  the  parties,  as  already 
stated,  restraints  are  usually  enforceable  if  commensurate  only 
with  the  reasonable  protection  of  the  covenantee  in  respect  to 
the  main  transactions  affected  by  the  contract.  But,  in  recent 
years,  even  the  fact  that  the  contract  is  one  for  the  sale  of 
property  or  of  business  and  good  will,  or  for  the  making  of  a 
partnership  or  a  corporation,  has  not  saved  it  from  invalidity 
if  it  could  be  shown  that  it  was  only  part  of  a  plan  to  acquire 
all  the  property  used  in  a  business  by  one  management  with  a 


644    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

view  to  establishing  a  monopoly.  Such  cases  go  a  step  further 
than  those  already  considered.  In  them  the  actual  intent  to 
monopolize  must  appear.  It  is  not  deemed  enough  that  the 
mere  tendency  of  the  provisions  of  the  contract  should  be  to 
restrain  competition.  In  such  cases  the  restraint  of  competition 
ceases  to  be  ancillary,  and  becomes  the  main  purpose  of  the 
contract,  and  the  transfer  of  property  and  good  will,  or  the 
partnership  agreement,  is  merely  ancillary  and  subordinate  to 
that  purpose.  The  principal  cases  of  this  class  are  Richardson 
V.  Buhl,  77  Mich.  632 ;  Arnot  v.  Coal  Co.,  68  N.  Y.  558 ;  People 
V.  Milk  Exchange,  145  N.  Y.  267 ;  People  v.  Refining  Co.,  54 
Hun.  366 ;  State  v.  Nebraska  Distilling  Co.,  29  Neb.  700 ;  State 
V.  Standard  Oil  Co.,  49  Ohio  St.  137;  Manufacturing  Co.  v. 
Klotz,  44  Fed.  72i ;  Distilling  &  Cattle  Feeding  Co.  v.  People, 
156  111.  448 ;  Carbon  Co.  v.  McMillin,  119  N.  Y.  46 ;  Harrow  Co. 
V.  Hench,  83  Fed.  36 ;  Factor  Co.  v.  Adler,  90  Cal.  110,  27  Pac. 
36;  Lumber  Co.  v.  Hayes,  76  Cal.  387. 

In  addition  to  the  cases  cited,  there  are  others  which  sustain 
the  general  principle,  but  in  them  there  exists  the  additional 
reason  for  holding  the  contracts  invalid  that  the  parties  were 
engaged  in  a  quasi  public  employment.  They  are  Gibbs  v.  Gas 
Co.,  130  U.  S.  396 ;  People  v.  Chicago  Gas  Trust  Co.,  130  111. 
268;  Stockton  v.  Railroad  Co.,  50  N.  J.  Eq.  52;  West  Va. 
Transp.  Co.  v.  Ohio  River  Pipe-Line  Co.,  22  W.  Va.  600; 
Hooker  v.  Vandewater,  4  Denio,  349 ;  Stanton  v.  Allen,  5  Denio, 
434 ;  Railroad  Co.  v.  Collins,  40  Ga.  582 ;  Hazlehurst  v.  Railroad 
Co.,  43  Ga.  13. 

Upon  this  view  of  the  law  and  the  authorities,  we  can  have 
no  doubt  that  the  association  of  the  defendants,  however  rea- 
sonable the  prices  they  fixed,  however  great  the  competition 
they  had  to  encounter,  and  however  great  the  necessity  for 
curbing  themselves  by  joint  agreement  from  committing  finan- 
cial suicide  by  ill-advised  competition,  was  void  at  common 
law,  because  in  restraint  of  trade,  and  tending  to  a  monopoly. 
But  the  facts  of  the  case  do  not  require  us  to  go  so  far  as  this, 
for  they  show  that  the  attempted  justification  of  this  associa- 
tion on  the  grounds  stated  is  without  foundation. 

The  defendants,  being  manufacturers  and  vendors  of  cast- 
iron  pipe,  entered  into  a  combination  to  raise  the  prices  for 
pipe  for  all  the  states  west  and  south  of  New  York,  Pennsyl- 


THE  COMMON  LAW  645 

vania,  and  Virginia,  constituting  considerably  more  than  three- 
quarters  of  the  territory  of  the  United  States,  and  significantly 
called  by  the  associates  "pay  territory."  Their  joint  annual 
output  was  220,000  tons.  The  total  capacity  of  all  the  other 
cast-iron  pipe  manufacturers  in  the  pay  territory  was  170,500 
tons.  Of  this,  45,000  tons  was  the  capacity  of  mills  in  Texas, 
Colorado,  and  Oregon,  so  far  removed  from  that  part  of  the 
pay  territory  where  the  demand  was  considerable  that  neces- 
sary freight  rates  excluded  them  from  the  possibility  of  com- 
peting, and  12,000  tons  was  the  possible  annual  capacity  of  a 
mill  at  St.  Louis,  which  was  practically  under  the  same  man- 
agement as  that  of  one  of  the  defendants'  mills.  Of  the  re- 
mainder of  the  mills  in  pay  territory  and  outside  of  the  com- 
bination, one  was  at  Columbus,  Ohio,  two  in  northern  Ohio, 
and  one  in  Michigan.  Their  aggregate  possible  annual  capacity 
was  about  one-half  the  usual  annual  output  of  the  defendants' 
mills.  They  were,  it  will  be  observed,  at  the  exti-eme  northern 
end  of  the  pay  territory,  while  the  defendants'  mills  at  Cin- 
cinnati, Louisville,  Chattanooga,  and  South  Pittsburg,  and 
Anniston,  and  Bessemer,  were  grouped  much  nearer  to  the 
center  of  the  pay  territory.  The  freight  upon  cast-iron  pipe 
amounts  to  a  considerable  percentage  of  the  price  at  which 
manufacturers  can  deliver  it  at  any  great  distance  from  the 
place  of  manufacture.  Within  the  margin  of  the  freight  per 
ton  which  Eastern  manufacturers  would  have  to  pay  to  deliver 
pipe  in  pay  territory,  the  defendants,  by  controlling  two-thirds 
of  the  output  in  pay  territory,  were  practically  able  to  fix 
prices.  The  competition  of  the  Ohio  and  Michigan  mills,  of 
course,  somewhat  affected  their  power  in  this  respect  in  the 
northern  part  of  the  pay  territory ;  but,  the  further  south  the 
place  of  delivery  was  to  be,  the  more  complete  the  monopoly 
over  the  trade  which  the  defendants  were  able  to  exercise, 
within  the  limit  already  described.  Much  evidence  is  adduced 
upon  affidavit  to  prove  that  defendants  had  no  power  arbi- 
trarily to  fix  prices,  and  that  they  were  always  obliged  to  meet 
competition.  To  the  extent  that  they  could  not  impose  prices 
on  the  public  in  excess  of  the  cost  price  of  pipe  with  freight 
from  the  Atlantic  seaboard  added,  this  is  true ;  but,  within  that 
limit,  they  could  fix  prices  as  they  chose.  The  most  cogent 
evidence  that  they  had  this  power  is  the  fact,  everywhere  ap- 


646    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

parent  in  the  record,  that  they  exercised  it.  The  details  of  the 
way  in  which  it  was  maintained  are  somewhat  obscured  by  the 
manner  in  which  the  proof  was  adduced  in  the  court  below, 
upon  affidavits  solely,  and  without  the  clarifying  effect  of 
cross-examination,  but  quite  enough  appears  to  leave  no  doubt 
of  the  ultimate  fact.  The  defendants  were,  by  their  combina- 
tion, therefore  able  to  deprive  the  public  in  a  large  territory  of 
the  advantages  otherwise  accruing  to  them  from  the  proximity 
of  defendants'  pipe  factories,  and,  by  keeping  prices  just  low 
enough  to  prevent  competition  by  Eastern  manufacturers,  to 
compel  the  public  to  pay  an  increase  over  what  the  price  would 
have  been,  if  fixed  by  competition  between  defendants,  nearly 
equal  to  the  advantage  in  freight  rates  enjoyed  by  defendants 
over  Eastern  competitors.  The  defendants  acquired  this  power 
by  voluntarily  agreeing  to  sell  only  at  prices  fixed  by  their 
committee,  and  by  allowing  the  highest  bidder  at  the  secret 
"auction  pool"  to  become  the  lowest  bidder  of  them  at  the 
public  letting.  Now,  the  restraint  thus  imposed  on  themselves 
was  only  partial.  It  did  not  cover  the  United  States.  There 
was  not  a  complete  monopoly.  It  was  tempered  by  the  fear  of 
competition,  and  it  affected  only  a  part  of  the  price.  But  this 
certainly  does  not  take  the  contract  of  association  out  of  the 
annulling  effect  of  the  rule  against  monopolies.  In  U.  S.  v. 
E.  C.  Knight  Co.,  156  U.  S.  1,  16,  Chief  Justice  Fuller,  in 
speaking  for  the  court,  said: 

"Again,  all  the  authorities  agree  that,  in  order  to  vitiate  a 
contract  or  combination,  it  is  not  essential  that  its  result  should 
be  a  complete  monopoly.  It  is  sufficient  if  it  really  tends  to 
that  end,  and  to  deprive  the  public  of  the  advantages  which 
flow  from  free  competition." 

It  has  been  earnestly  pressed  upon  us  that  the  prices  at  which 
the  cast-iron  pipe  was  sold  in  pay  territory  were  reasonable. 
A  great  many  affidavits  of  purchasers  of  pipe  in  pay  territory, 
all  drawn  by  the  same  hand  or  from  the  same  model,  are  pro- 
duced, in  which  the  affiants  say  that,  in  their  opinion,  the  prices 
at  which  pipe  has  been  sold  by  defendants  have  been  reason- 
able. We  do  not  think  the  issue  an  important  one,  because,  as 
already  stated,  we  do  not  think  that  at  common  law  there  is 
any  question  of  reasonableness  open  to  the  courts  with  refer- 
ence to  such  a  contract.     Its  tendency  was  certainly  to  give 


THE  COMMON  LAW  647 

defendants  the  power  to  charge  unreasonable  prices,  had  they 
chosen  to  do  so.  But,  if  it  were  important,  we  should  un- 
hesitatingly find  that  the  prices  charged  in  the  instances  which 
were  in  evidence  were  unreasonable.  The  letters  from  the 
manager  of  the  Chattanooga  foundry  written  to  the  other  de- 
fendants, and  discussing  the  prices  fixed  by  the  association,  do 
not  leave  the  slightest  doubt  upon  this  point,  and  outweigh  the 
perfunctory  affidavits  produced  by  the  defendants.  The  cost 
of  producing  pipe  at  Chattanooga,  together  with  a  reasonable 
profit,  did  not  exceed  $15  a  ton.  It  could  have  been  delivered 
at  Atlanta  at  $17  to  $18  a  ton,  and  yet  the  lowest  price  which 
that  foundry  was  permitted  by  the  rules  of  the  association  to 
bid  was  $24.25.  The  same  thing  was  true  all  through  pay 
territory  to  a  greater  or  less  degree,  and  especially  at ' '  reserved 
cities." 

Another  aspect  of  this  contract  of  association  brings  it  within 
the  term  used  in  the  statute,  "a  conspiracy  in  restraint  of 
trade. ' '  A  conspiracy  is  a  combination  of  two  or  more  persons 
to  accomplish  an  unlawful  end  by  lawful  means  or  a  lawful  end 
by  unlawful  means.  In  the  answer  of  the  defendants,  it  is 
averred  that  the  chief  way  in  which  cast-iron  pipe  is  sold  is 
by  contracts  let  after  competitive  bidding  invited  by  the  in- 
tending purchaser.  It  would  have  much  interfered  with  the 
smooth  working  of  defendants'  association  had  its  existence 
and  purposes  become  known  to  the  public.  A  part  of  the  plan 
was  a  deliberate  attempt  to  create  in  the  minds  of  the  members 
of  the  public  inviting  bids  the  belief  that  competition  existed 
between  the  defendants.  Several  of  the  defendants  were  re- 
quired to  bid  at  every  letting,  and  to  make  their  bids  at  such 
prices  that  the  one  already  selected  to  obtain  the  contract 
should  have  the  lowest  bid.  It  is  well  settled  that  an  agree- 
ment between  intending  bidders  at  a  public  auction  or  a  public 
letting  not  to  bid  against  each  other,  and  thus  to  prevent  com- 
petition, is  a  fraud  upon  the  intending  vendor  or  contractor, 
and  the  ensuing  sale  or  contract  will  be  set  aside.  Breslin  v. 
Brown,  24  Ohio  St.  565;  Atcheson  v.  Mallon,  43  N.  Y.  147; 
Loyd  V.  Malone,  23  111.  41;  Wooton  v.  Hinkle,  20  Mo.  290; 
Phippen  v.  Stickney,  3  Mete.  (Mass.)  384;  Kearney  v.  Taylor, 
15  How.  494,  519;  Wilbur  v.  How,  8  Johns.  444;  Hannah  v. 
Fife,  27  Mich.  172;  Gibbs  v.  Smith,  115  Mass.  592;  Swan  v. 


648    COMBINATIONS  AND  RESTRAINT  OF  TRADE 

Chorpenning,  20  Cal.  182;  Gardiner  v.  Morse,  25  Me.  140; 
Ingram  v.  Ingram,  49  N.  C.  188;  Brisbane  v.  Adams,  3  N.  Y. 
129;  Woodruff  v.  Berry,  40  Ark.  251;  Wald,  Pol.  Cont.  310, 
note  by  Mr.  Wald,  and  eases  cited.  The  case  of  Jones  v.  North, 
L.  R.  19  Eq.  426,  to  the  contrary,  cannot  be  supported.  The 
largest  purchasers  of  pipe  are  municipal  corporations,  and  they 
are  by  law  required  to  solicit  bids  for  the  sale  of  pipe  in  order 
that  the  public  may  get  the  benefit  of  competition.  One  of  the 
means  adopted  by  the  defendants  in  their  plan  of  combination 
was  this  illegal  and  fraudulent  effort  to  evade  such  laws,  and 
to  deceive  intending  purchasers.  No  matter  what  the  excuse 
for  the  combination  by  defendants  in  restraint  of  trade,  the 
illegality  of  the  means  stamps  it  as  a  conspiracy,  and  so  brings 
it  within  that  term  of  the  federal  statute. 

The  second  question  is  whether  the  trade  restrained  by  the 
combination  of  the  defendants  was  interstate  trade.  [Balance 
of  opinion  relating  to  this  point  is  omitted.] 

For  the  reasons  given,  the  decree  of  the  circuit  court  dis- 
missing the  bill  must  he  reversed,  with  instructions  to  enter  a 
decree  for  the  United  Sttites  perpetually  enjoining  the  defend- 
ants from  maintaining  the  comhination  in  cast-iron  pipe  de- 
scribed in  the  bill,  and  substantially  admitted  in  the  answer, 
and  from  doing  any  business  thereunder.^^ 


DUNBAR  V.  AMERICAN  TELEPHONE  AND  TELEGRAPH 

COMPANY 

(Supreme  Court  of  Illinois,  1909.    238  111.  456.) 

(See  ante  p.  105,  where  case  is  given  in  full.) 

84 — This  judgment,  slightly  modi-       Pipe  &  Steel  Co.  v.  U.  S.,  175  U.  S. 
fied  so  as   not  to   affect  intra-state       211,  given  post  p.  772. 
trade,    was    affirmed    in    Addystone 


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NEGOTIABLE  INSTRUMENTS BAYS.  A  HANDBOOK  ON  THE  LAW  OF  NEGO- 
TIABLE PAPER,  containing  the  text  of  the  Uniform  Negotiable  Instruments  Act, 
with  Questions,  Problems  and  Forms,  by  Alfred  W.  Bays,  Member  of  the  Chicago 
Bar,  and  Professor  of  Commercial  Law  in  Northwestern  University  School  of  Com- 
merce.    $1.50. 

NEGOTIABLE   INSTRUMENTS BUNKER.   THE   NEGOTIABLE   INSTRUMENTS 

LAW,  WITH  ANNOTATIONS,  by  Robert  E.  Bunker,  of  the  Michigan  Bar,  and 
Professor  of  the  Law  of  Bills  and  Notes  in  the  University  of  Michigan  Law  School. 
$3.50. 


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NEGOTIABLE    INSTRUMENTS BUNKER'S    SELECTED    CASES    ON    THE    LAW    OF 

NEGOTIABLE  INSTRUMENTS,  by  Robert  E.  Bunker,  of  the  Michigan  Bar,  and 
Professor  of  the  Law  of  Bills  and  Notes  in  the  University  of  Michigan  Law  SchooL 
$4.00. 

NEGOTIABLE  INSTRUMENTS OGDEN.  A  TREATISE  ON  THE  LAW  OF  NEGO- 
TIABLE INSTRUMENTS,  including  Promissory  Notes,  Bills  of  Exchange,  Bank 
Cheques  and  other  Commjercial  Paper,  with  the  Negotiable  Instruments  Law  of  the 
United  States,  as  well  as  the  Pleading,  Trial  Evidence,  and  Constructive  Tables 
arranged  alphabetically  by  States,  by  James  Matlock  Ogden,  of  the  Indianapolis 
Bar,  and  Professor  of  Law  In  the  Indiana  Law  School.      $4.00. 

NEGOTIABLE  INSTRUMENTS SELOVER.  A  TREATISE  ON  NEGOTIABLE  IN- 
STRUMENTS FOR  EVERY  STATE,  by  Arthur  W.  Selover.  Second  Edition  by 
William  H.  Oppenheimer,  of  the  St.  Paul  Bar.      $4.00. 

OFFICERS GOODNOW'S  CASES  ON  THE  LAW  OF  OFFICERS.  INCLUDING  EX- 
TRAORDINARY LEGAL  REMEDIES,  by  Frank  J.  Goodnow,  President  of  Johns 
Hopkins  University.      $5.00. 

PARTNERSHIP BAYS.       A    HANDBOOK    ON    THE    LAW    OF    PARTNERSHIP,    with 

Questions,  Problems  and  Forms,  by  Alfred  W.  Bays,  Member  of  the  Chicago  Bar, 
and  Professor  of  Commercial  Law  In  the  Northwestern  University  School  of  Com- 
merce.     $1.50. 

PARTNERSHIP MECHEM.   THE  ELEMENTS  OF  THE  LAW  OF  PARTNERSHIP. 

by  Floyd  R.  Mechem,  author  of  "Mechem  on  Agency,"  "Mechem  on  Public  Officers," 
"Mechem  on  Sales,"  and  Professor  of  J^aw  in  the  University  of  Chicago.     $2.50. 

PARTNERSHIP MECHEM'S    CASES    ON    THE    LAW    OF    PARTNERSHIP,    by   Floyd 

R.  Mechem,  author  of  "Mechem  on  Agency,"  "Mechem  on  Public  Officers," 
"Mechem's  Elements  of  Partnership,"  Editor  of  Mechera's  Hutchinson  on  Carriers, 
"Mechem's  Cases  on  Agency,"  etc..  Professor  of  Law  In  the  University  of  Chicago. 
Second  Edition,  by  Frank  L.  Sage,  Professor  of  Law  in  the  University  of  Michigan. 
$3.50. 

PARTNERSHIP (ENLARGED   EDITION)    MECHEM'S  CASES.      Same  as  above,  with 

addition  of   Supplement.      One  volume.   Third  Edition.      $4.50. 

PARTNERSHIP SHUMAKER.       A    TREATISE    ON    THE    LAW    OF    PARTNERSHIP. 

by  Walter  A.   Shumaker.    Second  Edition.     $3.00. 

PERSONAL  PROPERTY CHILDS.   THE  PRINCIPLES  OF  THE  LAW  OF  PERSONAL 

PROPERTY.  Sales,  Chattels  and  Choses,  including  Sales  of  Goods,  Sales,  Execution, 
Chattel  Mortgages,  Gifts,  Lost  Property,  Insurance,  Patents,  Copyrights,  Trade 
Marks,  Remedies  of  Actions,  etc.,  by  Frank  Hall  Chllds,  of  the  Chicago  Bar,  sometime 
Professor  of  the  Law  of  Personal  Property  in  Chicago  Kent  College  of  Law. 
$3.50. 

PRACTICE FOSTER'S     FIRST     BOOK     OF     PRACTICE AT     COMMON     LAW.     IN 

EQUITY.  AND  UNDER  THE  CODES  WITH  FORMS.  Third  Edition,  by  Lemuel  H. 
Foster,  of  the  Chicago  Bar.      $4.00. 

PROPERTY ROOD'S  CASES  ON  PROPERTY.  Second  Edition.  Decisions,  Stat- 
utes, etc.,  concerning  the  Law  of  the  States  and  Land,  by  John  R.  Rood,  Professor 
of  Law  in  the  University  of  Michigan.     $4.00, 


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QUIZZERS SPRAGUE.       QUIZ    BOOKS    FOR    LAW  STUDENTS.       QUESTIONS   AND 

ANSWERS  ON  ALL  SUBJECTS.  COVERING  ALL  BRANCHES  OF  THE  LAW.  each, 
50  cents.  Twenty-eight  numbers,  as  follows:  Blackstone,  Vol.  I;  Blackstone, 
Vol.  II;  Blackstone,  Vol.  Ill;  Blackstone,  Vol.  IV;  Kent's  Commentaries,  Vol.  I; 
Kent's  Commentaries,  Vol.  II;  Kent's  Commentaries,  Vol.  Ill;  Kent's  Commentaries, 
Vol.  IV;  Attachments;  Domestic  Relations;  Criminal  Law;  Torts;  Real  Property; 
Constitutional  Law;  Contracts;  Equity  Pleadiag  and  Practice;  Common  Law  Plead- 
ing; Bills,  Notes  and  Checks;  Equity;  Agency;  Partnership;  Sales  of  Personal 
Property ;  Evidence ;  Elementary  Law ;  Baihnents  &  Carriers ;  Wills  and  Estates ; 
Suretyship  and  Guaranty;  Insurance. 

QUIZZERS WALSH.      STUDENTS'   QUIZ   BOOKS.      Fourteen  numbers.      Each,    60 

cents. 

REAL  PROPERTY BAYS.   A  HANDBOOK  ON  THE  LAW  OF  PROPERTY.  Real 

and  Personal,  with  Questions,  Problems  and  Forms,  by  Alfred  W.  Bays,  member 
of  the  Chicago  Bar,  and  Professor  of  Commercial  Law  in  Northwestern  University 
School   of  Commerce.      $1.50. 

REAL  PROPERTY HAWLEY  &  McGREGOR.   A  TREATISE  ON  THE  LAWS  OF 

REAL  PROPERTY,  by  John  G.  Hawley  and  Malcolm  McGregor,  Members  of  the 
Michigan  Bar,  and  authors  of  "Hawley  &  McGregoP  on  Criminal  Law."  Third 
Edition.     $4.5  0. 

REAL    PROPERTY TIFFANY.       A    TREATISE    ON    THE    MODERN    LAW   OF    REAL 

PROPERTY  AND  OTHER  INTERESTS  IN  LAND,  by  Herbert  Thorndyke  Tiffany, 
of  the  Baltimore  Bar,  and  author  of  "Tiffany's  Landlord  and  Tenant."  Two  volumes, 
$10.00.    Same,  Students'  Edition  (two  volumes  in  one),  $7.00. 

REAL   PROPERTY WARVELLE.     THE   PRINCIPLES   OF  THE  AMERICAN    LAW  OF 

REAL  PROPERTY,  by  George  C.  Warvelle,  of  the  Chicago  Bar,  author  of  a  treatise 
on  Abstracts  of  Title,  the  "Law  of  Vendors  and  Purchasers,"  "Legal  Ethics,"  etc. 
Third  Edition.      $4.00. 

ROMAN      LAW SANDARS.       THE      INSTITUTES     OF     THE     JUSTINIANS.      WITH 

ENGLISH  INTRODUCTION.  TRANSLATION  AND  NOTES,  by  T.  C.  Sandars, 
Barrister  at  Law,  Late  Fellow  of  Oriel  College,  Oxford.  First  American  Edition, 
with  Introduction  by  W.  G.  Hammon.      $5.00. 

SALES BAYS.       A    HANDBOOK   ON    THE    LAW   OF   SALES,   of   Personal  Property, 

containing  a  copy  of  the  text  of  the  Uniform  Sales  Act,  and  the  Uniform  Bills  of 
Lading  Act,  with  Questions,  Problems  and  Forms,  by  Alfred  W.  Bays,  Member  of 
the  Chicago  Bar  and  Professor  of  Commercial  Law  in  Northwestern  University 
School  of  Commerce.     $1.50. 

SURETYSHIP BAYS.        A     HANDBOOK    ON    THE     LAW    OF    SURETYSHIP,    with 

Questions,  Problems,  and  Forms,  by  Alfred  W.  Bays,  member  of  the  Chicago  Bar, 
and  Professor  of  Commercial  Law,  Northwestern  University  School  of  Commerce. 
$1.50. 

SURETYSHIP SPENCER.     SURETYSHIP    AND    GUARANTY.     The   general   Law    of 

Suretyship  including  commercial  and  noncommercial  guaranties,  and  compensated 
corporate  suretyship,  by  Edward  W.  Spencer,  of  the  New  York  Bar,  Dean  of  the 
Marquette  University  College  of  Law.      $3.50. 

SURETYSHIP WILSON'S  SELECTED  CASES  ON  THE   LAW  OF  SURETYSHIP  AND 

GUARANTY,  by  Henry  H.  Wilson,  Professor  of  Law  in  the  University  of  Nebraska. 
$4.00. 


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TAXATION GOODNOW'S  CASES  ON  THE   LAW  OF  TAXATION,  by  Frank  J.  Good- 

now,   Eaton  Professor  of  Administrative  Law,   and  Municipal  Science  In  Columbia 
University  Law  School.      $5.00. 

TORTS COOLEY.      ELEMENTS,  by  Hon.  Thomas  M.  Cooley.      $3.50. 

TORTS COOLEY.      A   NEW   LAW  SCHOOL   EDITION.      A  TREATISE  ON  THE   LAW 

OF   TORTS.    OR    THE    WRONGS   WHICH    ARISE    INDEPENDENT   OF    CONTRACT, 

by  Thomas  M.   Cooley.     Students'  Edition,  by  John  Lewis,  author  of  a  treatise  on 
the  Law  of  Eminent  Domain.      $4.00. 

TRIAL    PRACTICE HINTON'S    CASE    ON    TRIAL    PRACTICE,    AT    COMMON    LAW 

AND    UNDER    MODERN    STATUTES,   by   E.    W.    Hlnton,   Professor  of  Law   in  the 
University  of  Chicago.      $4.00. 

TRIAL    PRACTICE SUNDERLAND'S    CASES    ON    TRIAL    PRACTICE,    by   Edson   R. 

Sunderland,  of  the  Law  Department  of  the  University  of  Michigan.     $4.00. 

WILLS BATES'  CASES  ON  WILLS,  by  Henry  M.  Bates,  Dean  of  the  Law  Depart- 
ment, University  of  Michigan. 

WILLS ROOD.      A  TREATISE  ON  THE  LAW  OF  WILLS,  Including  also  Gifts  Causa 

Mortis,  and  a  summary  of  the  law  of  descent,  distribution  and  administration,  by 
John  R.  Rood,  Professor  of  Law  in  the  University  of  Michigan.     $4.00. 


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